Macro-Financial Shocks and Media Coverage of Commodity Markets: A Time-Varying Spillover Analysis

Abstract This paper measures media sentiment for 25 commodities and their dynamic connections with commodity market groups (real assets price indices) and macro-financial shocks, such as inflation, economic policy uncertainty, financial conditions index, supply chain pressure index, geopolitical risk, and industrial production. By applying the time-varying parameter vector autoregressive model, we find that commodities and their sentiments and industrial production are predominantly shock receivers, while economic policy uncertainty and geopolitical risk are shock transmitters. Also, the network approach reveals two main mechanisms by which macro-financial indicators spill over shocks to the commodity markets, either directly or indirectly through the commodity sentiments. We find an asymmetric impact where positive sentiment about commodities receives shocks from macro-financial shocks, while negative sentiment spills over shocks to global inflation. Our results play a significant role in investment decisions and policy formulation by showing how global macro-financial shocks interact and influence commodity markets.