How do risk shocks reshape the spillovers among the oil, gold, emerging, and developed markets? Evidence from a new TVP-VAR-based wavelet coherence framework

To quantify the impacts of risk shocks on time-domain and frequency-domain spillovers, we propose a new empirical framework based on TVP-VAR and wavelet coherence analysis. We illustrate the methodology by analysing the spillovers among the gold, oil, emerging, and developed markets from 10 February 2011 to 2 April 2024 and obtain intriguing findings. First, the dynamic spillovers among markets rise significantly during turbulent periods. The dynamic net spillover results show that the gold and emerging markets are mainly the spillover receivers, developed markets are spillover emitters, and the oil market plays a switching role over time. Second, risk shocks have frequency-dependent impacts on the spillovers among markets. The effects are concentrated in the medium- to long-term ranges of 2015, 2018, and 2020–2021, and the relationship between risk volatility and dynamic total connectedness is positive. The impact of risk volatility on net market dynamic spillovers is heterogeneous in the time and frequency domains and the lead-lag relationship. Our findings have important implications for policymakers and investors.