Exploring Nexus Between Oil Price Shocks and Copper Production: Analysing the Role of Mineral Prices and Geopolitical Factors in Saudi Arabia
摘要
This study examines the dynamic connectedness between global oil price shocks and copper production in Saudi Arabia during geopolitical unrest, using monthly data from July 2012 to December 2022. Given the fat-tailed nature of the data, this research employs the cross-quantilogram and QVAR dynamic connectedness methodologies. Our findings reveal that global oil price ‘demand’, ‘supply’, and ‘risk’ shocks have negative and positive spillover effects on copper production during bearish and booming market conditions, respectively. Notably, negative spillover effects from copper prices and geopolitical risks on copper production are observed from bearish to booming market scenarios. In addition, findings based on the QVAR approach show that copper production and its prices are vulnerable to volatility shocks. Meanwhile, oil price ‘demand,’ ‘supply,’ and ‘risk’ shocks, along with Saudi Arabian geopolitical events, serve as transmitters of these shocks. This paper contributes to the empirical investigation of the production theory in relation to the price dynamics of substitute/complementary goods and the economy of uncertainty (oil price shocks and geopolitics) theories. This research offers significant policy implications for addressing challenges related to oil price shocks, copper prices, and the geopolitical landscape of Saudi Arabia.