THE COMMODITY PUZZLE OF THE CONNECTOGRAPHIC INTERCONNECTEDNESS OF FINANCIAL MARKETS
Abstract
Lutsyshyn Z.O., Katrych O.D. THE COMMODITY PUZZLE OF THE CONNECTOGRAPHIC INTERCONNECTEDNESS OF FINANCIAL MARKETS
Purpose. Scientific substantiation of the essence of interconnectedness of commodity markets and its impact on the price dynamics of goods in the context of globalisation.
Methodology of research. In the course of the research, the following general scientific and special methods were used: induction and deduction - at the stage of collecting, systematizing, and processing information to identify trends and cause-and-effect relationships in the interconnectedness of commodity markets, as well as to predict possible scenarios for price dynamics development; analysis and synthesis - to identify the main trends in the development of global raw material markets, develop proposals for risk management and price stabilization; abstract-logical - to summarize information from various sources and create a comprehensive understanding of the researched problem, form theoretical conclusions and generalizations; comparative method - to analyze the main vectors of interaction between the oil, gold, silver, and other raw material markets to identify global patterns and cause-and-effect relationships between them; fundamental analysis method - to study the mutual influence and interconnectedness of related markets, particularly between the oil, gold, and silver markets with financial markets; graphical method - to visualize the research results.
Findings. The theoretical foundations and essential characteristics of the interconnectedness of commodity markets, their relationship, and influence on financial markets as adjacent markets have been considered and systematized. The impact of price dynamics on major raw material markets, such as oil, gold, silver, and others, under globalization conditions has been analyzed. It has been established that the high interconnectedness between markets creates difficulties in forecasting and managing price fluctuations. It was found that changes in oil prices have a significant impact on production costs in many industries, which, in turn, affects the prices of other raw materials. The interconnectedness between the markets of metals and energy carriers has been analyzed. An increase in oil prices leads to higher metal prices due to increased production and transportation costs. It has been determined that the markets for gold and silver demonstrate synchronous movements due to their role as investment assets, especially during periods of economic instability. It has been established that agricultural commodity prices also depend on the cost of energy carriers.
Thus, the research results confirm the high degree of interconnectedness between different commodity markets and emphasize the need for a comprehensive approach to their analysis and management to ensure stable economic development and financial stability.
Originality. The essence of the interconnectedness of commodity markets and its impact on the price dynamics of raw materials have been scientifically substantiated. It is argued that the interconnectedness of commodity markets is a complex and multifaceted phenomenon, determined not only by economic but also by political and technological factors. The main characteristics of the interconnectedness between the markets of oil, gold, silver, and other key raw materials have been generalized, and their role in ensuring the stability of the global economy under globalization conditions has been substantiated. Empirical analysis has shown that changes in oil prices significantly affect other commodity markets, particularly metals and agricultural products, due to increased production costs. It has been found that an increase in oil prices leads to higher prices for metals, such as nickel and aluminum, as well as for agricultural products. The study demonstrated that the markets for gold and silver show synchronous movements due to their role as investment assets during periods of economic instability.
For the first time, the impact of technological innovations on the price dynamics of commodity markets has been systematized. It has been proven that the development of shale oil extraction technologies in the USA significantly increased supply in the market, reducing oil prices. Moreover, the growth of investments in renewable energy sources decreases the demand for traditional energy carriers, which also affects their price dynamics. The impact of geopolitical events and economic crises on the interconnectedness of commodity markets has been studied. It has been found that political instability in oil-producing countries can cause a sharp rise in oil prices, which affects the prices of metals and agricultural products. Analysis has shown that global economic crises, such as the COVID-19 pandemic, significantly impact commodity markets by changing investment flows and increasing demand for safe-haven assets such as gold.
All the aforementioned factors allow us to conclude that the interconnectedness between commodity, raw material, and financial markets, especially adjacent ones, is strengthening. This confirms the architectural complexity of the current global financial system and the existence and enhancement, in terms of Parag Khanna’s connectography, of interconnectedness in the global financial system on various spatial levels, including transversal connections.
Thus, the scientific novelty of the research results lies in the comprehensive analysis of the interconnectedness of commodity markets, the identification of the main mechanisms of their interaction and influence on price dynamics, and the development of effective risk management strategies to ensure stable economic development and financial stability.
Practical value. The conclusions and recommendations substantiated by the research results can be used to develop effective risk management strategies in commodity markets, stabilize raw material prices, and make informed decisions regarding investments in energy infrastructure and renewable energy sources. This will contribute to stable economic development and financial stability under globalization conditions.
Key words: Interconnectedness, connectographic interconnectedness, price dynamics, global financial system, raw materials, oil, gold, silver, economic stability, globalization, risk management, geopolitical events, technological innovations, financial stability.
Keywords
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