Economic policy uncertainty, geopolitical risks, and the heterogeneity of commodity price fluctuations in China ——an empirical study based on TVP-SV-VAR model

The combination of geopolitical conflicts and economic shocks could cause severe volatility in the global commodity market. Based on the monthly data from June 2006 to March 2023, this paper employs the TVP-SV-VAR model to investigate the time-varying impacts of economic policy uncertainty (EPU) and China's geopolitical risk (GPRC) on China's commodities prices (CCPI). The findings reveal that: (1) CCPI can be collectively influenced by EPU and GPRC shocks, with time-varying impulse responses showing notable fluctuations with alternating positive and negative values. The response of CCPI to EPU is more intense than that to GPRC shock after 2019; (2) Under the financial crisis, GPRC has a significantly positive impact on CCPI, while positive responses to global EPU and China's EPU are more pronounced under the Russia-Ukraine conflict. Under the Sino-US trade friction, the responses of CCPI to various shocks are mostly positive, with a continuing positive impact of EPU; (3) The responses of energy prices, agricultural product prices, and non-ferrous metal prices align with that of overall commodity prices. However, under the Russia-Ukraine conflict, the positive impulse responses of non-ferrous metal prices to EPU and GRPC shocks are persistent.