Dynamic time-frequency connectedness and risk spillover between geopolitical risks and natural resources

Geopolitical risks (GPR) affect the price of natural resources, which are important for survival and sustainable economy. Different from previous studies, we examine the relationship between GPR and natural resource prices from the perspective of time-varying dynamics and time-frequency analysis. The correlations and risk spillover are measured through Empirical Mode Decomposition, TVP Coefficient of Rank Correlation and TVP-Copula-CoVaR model. The results show that GPR have time-varying and heterogeneous characteristics on the volatility of different natural resource prices. First, high frequency component has a stronger impact than the low frequency component. The short-term impact of GPR on natural resource prices is stronger than the long-term. Second, there is a stronger correlation between gold and silver. Crude oil and natural gas markets are more closely related. GPR have a positive relationship with precious metals and crude oil prices. The position of natural gas in the energy market has been significantly improved. GPR have a negative effect on common metal and natural gas. Third, the increase of GPR has significantly affected the stability of the market and intensified the risk spillover of the natural resource prices. Finally, there are asymmetric upside and downside risk spillovers among natural resource markets. The downside risk spillovers of high frequency and low frequency components are more significant.