International and Chinese energy markets: Dynamic spillover effects

On the basis of a time-varying parametric vector autoregressive model (TVP-VAR) with spillover index model and wavelet coherence analysis, we study spillover effects of price fluctuations in global and Chinese energy markets. The empirical results indicate that the price trends of coal, crude oil, and natural gas in China and the world are closely interlinked. Extreme events have significantly amplified energy market fluctuations' spillover effect. Additionally, international energy market is a net exporter of fluctuations and spillovers, especially crude oil, and natural gas, which is consistent with China's energy import structure. There are time-varying characteristics and cross-effects between spillover effects in different energy markets. Finally, rising shipping costs, increased stock market volatility, and geopolitical risks are more likely to exacerbate cross-market risk spillovers, while exchange rate depreciation and economic policy uncertainty can dampen risk spillovers to some extent. Based on our findings, we recommend the following actions: build a comprehensive energy price warning mechanism, establish and improve the natural gas futures market, set up a more diversified investment portfolio and dynamically adjust investment strategies, and more flexible and precise policy combinations.