On the time-varying spillover between nonferrous metals prices, geopolitical risks, and global economic policy uncertainty

The present research investigates the dynamic interrelationships between the main nonferrous metal prices (aluminum, copper, lead, nickel, tin, and zinc) and two major risk factors, namely geopolitical risks, and economic policy uncertainty. The analysis employs the TVP-VAR connectedness approach for monthly data from January 1997 to December 2022. The findings may be summarized as follows. First, the analysis confirms the presence of strong spillover effects, which have intensified since the initiation of the financialization of commodity markets during the 2000 s. Second, copper is the most transmitter and receiver of shocks, followed by aluminum and zinc. Moreover, these three metals are net transmitters of shocks for other metals. On the other hand, lead, nickel, and tin are net receivers of shocks from the system. Overall, the study identifies two major clusters of nonferrous metals, aluminum, copper, and zinc, as net transmitters of shocks and lead, nickel, and tin as net receivers of shocks. Third, geopolitical risks and economic policy uncertainty are net receivers of shocks. Moreover, the pairwise connectedness indicates that geopolitical risks are primarily influenced by lead and zinc, while economic policy uncertainty is influenced by all metals, with aluminum being the most prominent. These findings have been shown to be not sensitive to different forecast horizons and lag orders.