The role of BDI in sectoral risk spillovers: a quantile connectedness approach

Purpose This study examines the shock transmission mechanisms between trade-driven sectors of the Australian economy and the Baltic Dry Index (BDI), with a particular focus on the changing roles of these sectors during periods of heightened market volatility. Design/methodology/approach The quantile connectedness approach (QCA) is employed to capture the direction and intensity of inter-sectoral shock spillovers across different levels of market stress. Findings The results reveal that the energy and mining sectors act as major transmitters of shocks, particularly during crisis periods. Additionally, the BDI exhibits increased sensitivity to sectoral shocks in times of elevated uncertainty, amplifying spillovers within the energy and financial sectors. Originality/value By offering a quantile-based perspective on the asymmetric effects of global economic fluctuations on sectoral interconnectedness, this study provides novel insights for policymakers seeking to develop sector-specific risk management and resilience strategies.