The time-frequency connectedness among metal, energy and carbon markets pre and during COVID-19 outbreak

Abstract

The study investigates static and dynamic returns spillover effects between metal (gold, silver, copper and aluminum), energy (oil, natural gas and coal) and carbon markets in different frequency domains using the Diebold Yilmaz (2012) and the Baruník and Křehlík (2018) method. The results show that total connectedness in the post-COVID world is significantly higher compared to pre-COVID-19 outbreak period. The total spillover is contributed mainly by short-term spillover effects. Moreover, metal markets especially copper and silver have higher explanatory power. Spillover within markets is stronger than across these markets. In addition, the carbon market is more heavily interactive with other markets, and the metal market especially copper has relatively high explanatory power for the carbon price fluctuations in post-COVID-19outbreak periods. According to the net spillover, copper and gold has a hedge function in the short- and long-term, respectively. Furthermore, the relationship among these markets is time-varying, affected by market uncertainty such as the outbreak or major events.