Exploring the Time-varying Connectedness and Contagion Effects among Exchange Rates of BRICS, Energy Commodities, and Volatilities

Thobekile Qabhobho, Anokye M. Adam, Anthony Adu-Asare Idun, Emmanuel Asafo-Adjei and Ebenezer Boateng
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Thobekile Qabhobho: Department of Economics, Faculty of Business and Economic Sciences, Nelson Mandela University, Port Elizabeth, South Africa,
Anokye M. Adam: Department of Finance, School of Business, University of Cape Coast, Cape Coast, Ghana.
Anthony Adu-Asare Idun: Department of Finance, School of Business, University of Cape Coast, Cape Coast, Ghana.
Emmanuel Asafo-Adjei: Department of Finance, School of Business, University of Cape Coast, Cape Coast, Ghana.
Ebenezer Boateng: Department of Finance, School of Business, University of Cape Coast, Cape Coast, Ghana.

International Journal of Energy Economics and Policy, 2023, vol. 13, issue 2, 272-283

Abstract: This paper investigates the total and net directional connectedness of the energy market and currency market amid volatilities (local and international) of BRICS for the period May 7, 2012 to March 31, 2022. The Time-varying parameter Vector Autoregression (TVP-VAR) connectedness approach is specifically employed. We reveal that the average value of the total connectedness index (TCI) is 46.91%, for the specific network of energy commodities, currency rates, and volatilities. Also, from the averaged dynamic connectedness, the global energy commodity index demonstrated the most transmitter of shocks. Conversely, BRICS currency markets (except for Brazilian Rubble) and most implied energy volatilities and realised exchange rate volatilities were net receivers of shocks. Moreover, the total connectivity indices were seen to vary significantly during the study sample period with strong susceptibility to crisis periods, especially, the COVID-19 pandemic. We advocate that most volatilities were consistent net transmitters across time as indicated by the net directional connectedness. The findings imply that in a network of energy commodities, exchange rate, and volatilities, risk minimisation is elated to boost investors confidence across time.

Keywords: Time-varying; Heterogeneity; Volatility spillover; Adaptive market hypothesis; Energy commodities (search for similar items in EconPapers)
JEL-codes: G10 G15 G19 O13 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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