Dynamic interlinkages between geopolitical stress and agricultural commodity market: Novel findings in the wake of the Russian Ukrainian conflict

Abstract

This study examines time-varying connectedness between agricultural commodities and geopolitical risk in terms of volatility. In this context, we employ the time- and frequency-based network connectedness approaches based on a time-varying parameter vector autoregression (TVP-VAR) model and use data from January 1, 2020, to January 4, 2023. Our findings indicate that (1) overall time-varying connectedness indexes are sharply amplified around geopolitical stress episodes; (2) wheat and the daily geopolitical risk index (GPRD) transmit notable volatility shocks starting in March 2022 because of the Russian invasion of Ukraine (RIU) on February 24, 2022; (3) persistent connectedness is sharply amplified around the RIU; and (4) temporary linkages dominate most of the period studied. Our findings have implications for investors, stakeholders, and policymakers in terms of their investment strategies and risk monitoring. Copyright (c) 2023 Borsa Istanbul Anonim Sirketi. Published by Elsevier B.V.