Time-varying effects of oil price shocks and economic policy uncertainty on the nonferrous metals industry: From the perspective of industrial security

Abstract

This paper uses a time-varying parametric vector autoregressive model with random fluctuations to examine the time-varying impacts of oil prices and economic policy uncertainty (EPU) on China's nonferrous metals industry. The findings indicate the following: (a) The impact of oil price shocks on the nonferrous metals industry is positive in the short term and diverse in the long term, while fluctuation trends are heterogeneous at different positions of the industry chain. (b) The impacts of EPU shocks on the industry show fluctuating trends after 2009, while the heterogeneous impacts of EPU shocks at different chain positions exist only on output. (c) Oil prices have a positive short-term effect on EPU, while the short-term effect of EPU on oil prices has gradually turned positive since the financial crisis, highlighting the asymmetric relationship between oil prices and EPU. (d) During the global financial crisis, the impact of oil prices and EPU on industry shocks increased significantly, indicating the importance of a stable economic environment. (e) Monetary and exchange rate policy uncertainty are the main sources of EPU shocks to oil prices, and trade policy uncertainty is the cause of inflationary effects.