COVID-19, the Russia–Ukraine war and the connectedness between the U.S. and Chinese agricultural futures markets

Abstract

Abstract This study focuses on how recent global crises such as the COVID-19 pandemic and the Russia–Ukraine war have affected the relationship between the U.S. and Chinese agricultural futures markets. By applying wavelet coherence analysis (WCA) and time-varying parameter vector autoregression (TVP-VAR), we obtain the following findings. First, both events have changed the correlation and lead–lag comovement between U.S. and Chinese soybean and corn futures returns but have little impact on the comovement between the two cotton futures returns. Second, U.S. agricultural markets transmit more volatility risk to Chinese markets than the risk spillover from the reverse direction. Third, the risk spillover enhancement effect from the war is stronger than that from the pandemic, which is obvious in both the soybean and corn futures markets but not in the cotton market. Our paper has implications for policy makers seeking to stabilize agricultural commodity prices during global crisis episodes and for designing strategies for cross-market hedging of spillover risks among commodity markets for international investors.