Analyzing the interconnection between rare earth market and green economy: Time-varying effects of trade policy uncertainty

Abstract

Understanding intricate dynamics between rare earth elements (REEs) and green economy, as well as the pivotal role of trade policy uncertainty (TPU), provides significant insights for the concurrent development of these markets. This paper estimates the short- and long-term correlations between the REEs market and green economy by the DCC-MIDAS model. Additionally, it employs the TVP-VAR model to investigate the impact of China’s and U.S. TPU shocks on the long-term correlation. Furthermore, this paper calculates ΔCoVaR to quantify the risk transmission from the REEs market to green economy and explore the impact of TPU shocks on it. The empirical results reveal a positive medium effect of TPU shocks, highlight the heterogeneity of effects of China’s and Due to the devastating effects of global warming and environmental degradation, coupled with heightened environmental awareness, there is an escalating imperative for the transition towards a more sustainable and greener development. These findings provide significant implications for investment decisions, strategic reserves and policymaking within the REEs and green economy sectors in the context of increasing TPU.