Work

Interactive effects of economic, geopolitical, and climate risks on commodity volatility

Year: 2025

Type: article

Abstract: This study employs a quantile moments approach to examine how economic policy uncertainty (EPU), geopolitical risk (GPR), and climate risks affect commodity return volatility. By incorporating interaction effects, we show that models ignoring these interactions underestimate volatility by up to 35% during stress periods. The analysis reveals varied effects across different volatility regimes, with transition climate risk intensifying market volatility particularly during turbulent times, whereas physical climate risk exhibits a mitigating effect. These findings offer valuable implications for risk management and policy coordination in commodity markets, highlighting the importance of considering interaction effects both normal and volatile market conditions.

Source: Journal of commodity markets

DOI: 10.1016/j.jcomm.2025.100518

Author: Thomas Leirvik

Institutions: Nord University, UiT The Arctic University of Norway

Language: English

Topic: Market Dynamics and Volatility

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Climate action

Open Access status: hybrid

Estimated APC paid: $2,910