The Impact of the Covid-19 Pandemic on the Dynamics of Financial
Instruments in the World Trade
IRYNA OTENKO1, IHOR HRABYNSKYI2, ALINA LYTVYNENKO1, ELENA LYTVYNENKO3,
MYKOLA POVOROZNYK4, DMYTRO NIKITIN4
1Department of International Economic Relations, Simon Kuznets Kharkiv National University of
Economics, 9A, Science Avenue, 61166, Kharkiv,
UKRAINE
2Department of International Economic Relations, Ivan Franko National University of Lviv,
1, University Street, 79000, Lviv,
UKRAINE
3Department of Economics and Business, State Biotechnology University,
44, Alchevskih Street, 61002, Kharkiv,
UKRAINE
4Department of International Accounting and Audit, Kyiv National Economic University,
54/1, Victory Avenue, 03057, Kyiv,
UKRAINE
Abstract: - The aim of the research was to measure the impact of the COVID-19 pandemic on the dynamics of
financial instruments in international trade. The study examined the dynamics of price changes and determined
the impact of the COVID-19 pandemic on the price of futures contracts on the global market. The impact of the
COVID-19 pandemic on the futures volatility dynamics in the global financial market was explored for major
commodity groups. The least-squares method was used as the main regression testing tool, while dynamics of
the indicators was assessed through graphical and trends methods. The study involves the World Bank’s data
for 2000-2021. The impact of the COVID-19 pandemic on the coal, natural gas, metals, beverage and food
futures price on the global financial market was established and proved to be statistically significant. It was
found that the pandemic had a statistically significant impact on the volatility of futures for coal, natural gas
and tin on the global financial market. The futures price is being affected by the COVID-19 pandemic because
of the collapse of global supply chains and countries’ protectionist measures. In aggregate, this produces
imbalances in the distribution of goods in the world and impedes their flow. The market is consequently
responding to the restrictions imposed by the COVID-19 pandemic by raising prices. The results obtained open
up new lines for research, in particular the impact of the COVID-19 pandemic on the supply and demand
structure on the world commodity markets.
Key-Words: - Futures, Commodity Flows, Commodity Groups, Volatility, International Trade, Foreign Trade
Financing.
Received: June 3, 2022. Revised: September 17, 2022. Accepted: October 6, 2022. Published: November 11, 2022.
1 Introduction
The 2020-2021 crisis caused by the COVID-19
pandemic required the governments around the
world to take measures to stimulate the economy. A
combination of an easing monetary policy
environment and the quantitative instruments of
monetary policy triggered an inflationary surge
worldwide [1]. Stimulating the economy with
monetary measures produces such effects after each
economic crisis. Inflation is spreading around the
world through international trade channels.
Increased inflation rate in one country entails the
increased value of its exports, thus increasing its
value in the international market. International
financial markets trading futures contracts for
various categories of goods are also involved in the
inflation transmission mechanism.
The economic downturn caused by the pandemic
has turned into an economic recession in some
regions of the world due to the disruption of supply
chains and problems with the movement of capital.
The world economy has no experience of such a
large-scale and all-encompassing negative factor as
a pandemic, so no country in the world was
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unprepared for the economic consequences of
closing borders and restricting the movement of
labor, financial resources, commodity flows, etc.
As a result, many countries of the world began to
show signs of economic decline, which intensified
and transformed into a financial crisis. The main
characteristics of the economic recession were the
growing deficit of state budgets in many countries
around the world, the fall in GDP, and the increase
in the burden on social and medical programs.
Nevertheless, the economic crisis caused by the
COVID-19 pandemic has spread through several
channels, which made it unprecedented. The first
channel is the collapse of international supply
chains. Many global supply chains have been
disrupted because of lockdowns and the ban on
border crossings, which led to a shortage of goods
on the international market. The second channel is
reduced export production caused by the reduced
demand as timely delivery has become impossible.
This resulted in increased prices for certain types of
products on the international market. The third
channel is energy prices. Rising energy prices in
2021 entailed an increased producer price index
(PPI), as energy is a component of the cost of all
goods without exception. Energy is used either for
the production or supply of goods, while energy is
used in both cases in the vast majority of consumer
and industrial goods. Besides, the share of energy in
the cost may be more than 50% in certain types of
industrial goods, such as metal and metal products.
In this case, increased cost of energy significantly
results in increased cost of production. Negative
expectations of rising prices also have a negative
effect on the futures value. Although the negative
impact of the COVID-19 pandemic on the economy
is undeniable [2], [3], [4], [5], the impact of the
pandemic on the dynamic changes in financial
instruments in world trade requires an in-depth
study. In particular, futures contracts obligating the
parties to transact products in the future are the most
common contacts in the financial markets. The
dynamics of commodity market prices in the future
with a certain time lag is determined by the futures
[6], [7]. Accordingly, the aim of our study was to
measure the impact of the COVID-19 pandemic on
the dynamics of futures in the international financial
market. The aim involved the following research
objectives:
- examine the dynamics of futures prices in the
global financial market for major commodity
groups;
- measure the impact of the COVID-19 pandemic
on the dynamics of futures prices in the global
financial market for major commodity groups;
- analyze the dynamics of futures volatility in the
global financial market for major commodity
groups;
- determine the impact of the COVID-19
pandemic on the dynamics of futures volatility in
the global financial market for major commodity
groups.
2 Literature Review
Many researchers focused on the effects of the
pandemic on various aspects of economic activity.
A pandemic can affect both the value of
commodities and the value of financial instruments
in international trade, such as futures contracts,
through a variety of channels. Authors [8] found a
direct impact of the pandemic on the foreign trade
of all the Visegrad Group countries of varying
extent. The authors studied the impact of the
pandemic on the volume of imports and exports of
these countries in the short term only. But it is
important to determine the impact of the pandemic
not so much on the trade volume as on the
qualitative indicators of international trade in
general and on the instruments of international trade
in particular.
The organization [9] report entitled The Effects of
Covid-19 Pandemic on International Trade and
Logistics states that the world is facing a serious
problem for international trade. In addition to
restricted movement of goods between countries,
the pandemic also triggered rising prices on the
global market. The shifts in supply and demand in
the global commodity market are transmitted to the
financial market. It especially affects the volatility
of financial instruments that service the movement
of commodity flows.
Authors [10], who evaluated the global economic
effects of COVID-19, emphasized a rapid reduction
in trade flows. The collapse of global supply chains
was stated as the main reason, which has
significantly complicated the delivery of goods from
one country to another. The authors did not,
however, consider the impact of the pandemic on
the instruments of international commodity trade.
The organization [11] study indicates that the
international trade drop caused by the pandemic has
triggered a chain reaction of declining output
worldwide. This has led to growth of unemployment
and aggravation of the economic situation in many
countries around the world. Nevertheless, the report
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did not cover the effects of the pandemic on
international trade instruments, although this issue is
extremely important for evaluation of current trends
in international trade. A study of the impact of the
pandemic on financial markets and its implications
[12], [13] indicates that the pandemic has
significantly affected the macroeconomic conditions
of the economic environment. New conditions
trigger new risks, which can cause volatility in
financial markets. In turn, the value of commodity
futures contracts determines their future value in the
market. So, the price of foreign trade instruments on
the secondary market determines the value of
commodities traded in international markets.
In their study of the impact of the COVID-19
pandemic and the consequent restrictions for
international trade on the value of agricultural
products, authors [14] stated its high volatility.
Prices for agricultural products largely depend on
yields that cannot be forecasted or set. The volatility
increased even more in the pandemic context,
according to the authors, it increased by 22% due to
the restrictions imposed by the pandemic.
Authors [15] maintain that world food prices are
rising due to the food shortages, even if there are no
signs of a food crisis. Those shortages are caused by
disruptions in food supplies; they increase cost of
energy used for transportation. Besides, many
countries have introduced protectionist measures to
meet their own food needs because of uncertainty
about the future food supplies. Such actions have
intensified the agiotage around food prices, which
has also contributed to rising prices. On the other
hand, financial market transactions with food
futures can promote redistribution of trade flows
and stabilization of prices in certain regions [1],
[16]. This will provide a more even distribution of
food products between regions of the world and will
incentivize the restoration of old supply chains or
the creation of new ones.
A literature review indicated that pandemic
restrictions have made international trade suffer
severely. The main problem is increased cost of
production caused by the failure of global supply
chains. This problem is best manifested in the
financial markets, where the market value of
products is formed through financial instruments
such as futures contracts. But the studies did not
address the use of financial instruments serving
international trade, which is a very important issue
today. Consequently, the aim of our study is to
determine the impact of the COVID-19 pandemic
on the dynamics of financial instruments used in
international trade.
3 Problem Solution
This research involved several stages, each
accompanied by building and testing regression
models. The first stage provided for analyzing the
dynamics of changes in futures prices in the global
financial market for major commodity groups. We
determined the general trend of changes in futures
prices for different commodity groups based on the
data obtained. The second stage involved
determining the impact of the COVID-19 pandemic
on the dynamics of changes in futures prices in the
global financial market for major commodity
groups, and determining the statistical significance
of the impact. We studied the dynamics of futures
volatility for commodity groups. The final stage was
aimed to determine the impact of the COVID-19
pandemic on the dynamics of futures volatility in
the global financial market for major commodity
groups. We used the World Bank’s methodology
[17] in our study to divide commodities on the
international market into the following groups
(Figure 1).
Fig. 1: Division of commodities into groups according to the World Bank’s methodology
Energy
Coal
Crude Oil
Natural Gas
Non-Energy
Metals
Fertilize
Agriculture
•Beverage
•Food
•Raw Materials
Precious Metals
Gold
Silver
Platinum
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We generated initial data for the study through
this approach, which included information on the
value of futures contracts as of the end of trading
(closing a position). The study covers the period of
2000 to 2021, involving monthly metrics in US
dollars taken from the official statistical database of
the World Bank on commodity markets [18]. The
aim of this study was achieved through building and
testing several models of the impact of the COVID-
19 pandemic on futures prices:
Model 1: Dependence of futures prices on the
international energy market on the COVID-19
pandemic:
, , =(19) (1)
where: – coal futures price; –
crude oil futures price; – natural gas
futures price; 19 – pandemic factor.
Model 2: Dependence of futures prices on the
international non-energy market on the COVID-19
pandemic:
, ,
=(19) (2)
where: – metals futures price; –
fertilizer futures price; – agricultural
futures price; 19 – pandemic factor.
Model 3: Dependence of futures prices on the
international precious metal market on the COVID-
19 pandemic:
,
, =(19) (3)
where: – gold futures price; – silver
futures price; – platinum futures price;
19 – pandemic factor.
We also built and tested models of the impact of
the COVID-19 pandemic on futures volatility.
Model 4: Dependence of futures volatility on the
international energy market on the COVID-19
pandemic:
, , =(19) (4)
where: – coal futures volatility;
– crude oil futures volatility; – natural
gas futures volatility; 19 – pandemic factor.
Model 5: Dependence of futures volatility on the
international non-energy market on the COVID-19
pandemic:
, ,
=(19) (5)
where: – metals futures volatility;
– fertilizer futures volatility;
– agricultural futures volatility; 19 –
pandemic factor.
Model 6: Dependence of futures volatility on the
international precious metal market on the COVID-
19 pandemic:
,
, =(19) (6)
where: – gold futures volatility;
– silver futures volatility; – platinum
futures volatility; 19 – pandemic factor.
The information was visualized through a
graphical method. The trend method was applied to
identify trends in the dynamics of indicators. The
least-squares method was used to measure the
impact of the pandemic on the resulting indicators.
The source data set was formed in Microsoft Excel,
while the regressions were built and tested followed
by graphing in Gretl.
4 Results
We started with a description of the research results
by analyzing the dynamics of energy futures prices
on the global market. The energy price demonstrates
positive dynamics in periods of growth of the world
economy and decline during crises (Figure 2). This
is evidenced by a significant drop in prices for all
energy resources without exception in 2008, 2014
and 2020.
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Fig. 2: Dynamics of energy futures prices on the global market
The pandemic outbreak caused a sharp drop in
energy prices due to the lockdowns introduced in
many countries around the world. This has
significantly reduced the international migration and
commodity flows. The collapse of global supply
chains has led to a significantly decreased energy
demand on the global market, which has entailed a
price drop. However, the natural gas and coal prices
increased from the second half of 2021. We
analyzed the impact of the COVID-19 pandemic on
the price of coal, crude oil and natural gas futures
contracts in the global financial market (Table 1).
Table 1. Impact of the COVID-19 pandemic on the price of coal, crude oil and natural gas futures on the global
market. Model 1 data: OLS, using observations 2000:01-2021:12 (T = 264).
Dependent variable
Coefficient
Std. Error
t-ratio
p-value
R-squared
Price Coal
27.6016
6.77670
4.073
<0.0001***
0.059548
Price Crude Oil
−7.64513
5.91279
−1.293
0.1972
0.006340
Price Natural Gas
0.253042
0.562068
0.4502
0.6529
0.000773
Model 1 data evidence that the COVID-19
pandemic had a statistically significant effect only
on coal pricing, as shown by a p-value of less than
0.0001. The pandemic had no statistically
significant effect on crude oil and natural gas futures
prices, where the reason may be the use of energy
resources, in particular oil and gas, as instruments to
exert economic pressure in the international
geopolitical arena. In this context, the futures price
depends on the current supply volume, which yields
to the demand, thus triggering a price increase. In
particular, this is the case with the natural gas prices
in late 2021 and early 2022 on the global market.
Next, we analyzed the dynamics of non-energy
prices, in particular for the commodity groups such
as metals, fertilizers and agricultural products.
Figure 3 visualizes information on the dynamics of
the metals futures prices on the global market.
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Fig. 3: Dynamics of the metals futures prices on the global market
1 In particular, metal prices had increased from the
early 2000’s until 2008. The economic recovery of
2010-2012 saw similar futures price increase.
During the economic recession of 2008-2009, 2014-
2015 and 2020, the metals futures price on the
global market dropped. This is an economic trend,
because the demand for finished products of
industries that use metal as a raw material decreases
in times of crisis. Figure 3 shows the dynamics of
the fertilizer futures contract price.
The dynamics of the fertilizer price on the global
market is also cyclical, depending on the world
economy development phase. The increase in the
fertilizer futures price is, however, determined not
so much by the dynamics of demand for fertilizers,
but by the cost of their production. Fertilizer
demand on the global market is relatively stable,
because the demand for agricultural products is
stable despite economic crises. But fertilizer
production requires energy, so the cost of fertilizer
futures contracts depends on the cost of fertilizer
production, in particular the cost of energy.
The dynamics of the agricultural futures prices is
illustrated in Figure 4.
Fig. 4: Dynamics of agricultural futures prices on the global market
The price of beverage, food and raw materials
futures contracts also depends on the cost of energy used for their manufacture. That is why the periods
after the active energy price increase are
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accompanied by simultaneous increase in price of
beverages, food and raw materials futures. Besides,
the collapse of global supply chains played an active
role during the COVID-19 pandemic, which caused
supply and demand imbalances on the global
market. This resulted in the significantly increased
price of this commodity group, especially of food.
We further analyzed the impact of the COVID-19
pandemic on the non-energy futures contracts
(Table 2).
Table 2. Impact of the COVID-19 pandemic on the metal, fertilizer and agricultural futures prices on the global
market. Model 2: OLS, using observations 2000:01-2021:12 (T = 264).
Dependent variable
Coefficient
Std. Error
t-ratio
p-value
R-squared
Metal
Price Aluminum
174.173
90.3646
1.927
0.0550*
0.013981
Price Iron ore
51.5472
9.99847
5.156
<0.0001***
0.092104
Price Copper
2403.90
499.175
4.816
<0.0001***
0.081319
Price Lead
387.843
156.444
2.479
0.0138**
0.022920
Price Tin
10014.1
1559.01
6.423
<0.0001***
0.136055
Price Nickel
631.725
1629.24
0.3877
0.6985
0.000574
Price Zinc
691.561
168.551
4.103
<0.0001***
0.060374
Fertilizers
Price Phosphate
−0.987750
15.8173
−0.06245
0.9503
0.000015
Price Potassium chloride
−48.3174
28.4151
−1.700
0.0902
0.010915
Agriculture
Beverages Index
12.4528
4.68729
2.657
0.0084***
0.026233
Food Index
21.2839
5.10445
4.170
<0.0001***
0.062230
Raw Materials Index
2.09850
3.86349
0.5432
0.5875
0.001125
Model 2 regression data show that the COVID-19
pandemic had a statistically significant positive
effect on all commodities other than nickel, which
means that the pandemic contributed to the increase
of metals futures price. Statistical significance
confirms this conclusion: aluminum (p-
value=0.0550), iron ore (p-value=0.0001), copper
(p-value=0.0001), lead (p-value=0.0138), lead (p-
value=0.0001), zinc (p-value=0.0001). These data
indicate that the pandemic factor was conducive to
the decreased global demand for metals.
The pandemic had no statistically significant effect
on the futures contract price for the fertilizer
commodity group. This may be caused by a stronger
factor — the cost of energy resources. The
pandemic had a statistically significant effect on the
beverage and food futures price. The evidence is the
corresponding p-value of 0.0084 for beverages and
0.0001 for food. At the same time, the pandemic
contributed to rising prices for these goods.
The results of testing the model of the COVID-19
pandemic impact on non-energy commodities show
a significant impact of the pandemic on metals and
agricultural products. The pandemic was conducive
to increasing prices for these commodities,
primarily because of the failure of global supply
chains, resulting in supply and demand imbalances.
Besides, increasing the cost of energy also exert
additional pressure on the futures price for these
commodity groups. We analyzed the dynamics of
precious metals futures prices on the global market
(Figure 5).
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Fig. 5: Dynamics of agricultural futures prices on the global market
The data of Figure 6 show that there is a correlation
between precious metals futures contract prices
depending on the world economy development
stage, as in the case of energy and non-energy
commodities. A peculiar feature is the greatest
dynamics of futures change observed for platinum,
and the smallest — for gold. Gold is a classic tool
for hedging financial risks, so the gold futures price
is the least prone to rapid changes. Moreover, gold
is a banking metal used to maintain the reserves of
central banks around the world. This factor also
affects the dynamics of its value during crises.
Fig. 6: Volatility of energy futures prices on the global market
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We further analyzed the impact of the COVID-19
pandemic on the precious metals futures contract price on the global market (Table 3).
Table 3. Impact of the COVID-19 pandemic on the gold, platinum and silver futures prices on the global
market. Model 3: OLS, using observations 2000:01-2021:12 (T = 264).
Dependent variable
Coefficient
Std. Error
t-ratio
p-value
R-squared
Price Gold
850.309
95.2790
8.924
<0.0001***
0.233122
Price Platinum
−100.404
80.7118
−1.244
0.2146
0.005872
Price Silver
7.91796
1.76351
4.490
<0.0001***
0.071446
Model 3 data demonstrate a significant impact of the
COVID-19 pandemic on the gold and silver futures
prices. The pandemic was conducive to the
increased price of these metals on the global market,
as evidenced by p-value of 0.0001 for gold and
0.0001 — for silver. But the platinum prices were
not significantly affected by the pandemic.
On the global financial markets, not so much the
price as price volatility is an important parameter of
commodity prices, which are mainly represented by
the futures contract prices. Price volatility describes
the long-term market trend towards the stable price
dynamics. Accordingly, the higher the price
volatility of a particular commodity, the higher the
risk of financial instruments related to that
commodity, including futures contracts. So, we
further analyzed the volatility of futures contracts
for different commodity groups.
The data of Figure 6 demonstrate significant
volatility in the energy futures contract prices. Price
volatility exceeds 20%, which is quite a high figure.
Besides, if we analyze the pandemic period, in
2020-2021 the maximum differences in the coal,
crude oil and natural gas futures price reach from
+30% to -20-30% for coal and natural gas, and from
+50% to -40% for crude oil. Such rapid fluctuations
in the futures prices spread uncertainty in the
financial market, thus leading to a persistent
volatility, as all participants try to compensate for
such differences by setting a high price. Next, we
analyzed the impact of the COVID-19 pandemic on
the volatility of the value of coal, crude oil and
natural gas futures contracts (Table 4).
Table 4. Impact of the COVID-19 pandemic on the volatility of coal, crude oil and natural gas futures on the
global market. Model 4: OLS, using observations 2000:01-2021:12 (T = 264).
Dependent variable
Coefficient
Std. Error
t-ratio
p-value
R-squared
Volatility Price Coal
3.46634
1.60097
2.165
0.0313**
0.017644
Volatility Price Crude Oil
1.35433
2.01413
0.6724
0.5019
0.001729
Volatility Price Natural Gas
5.29377
1.36619
3.875
0.0001***
0.054397
Model 4 data indicate a statistically significant
impact of the pandemic factor on price volatility for
coal and natural gas futures contracts. The p-value
0.0313 for coal futures and 0.0001 for natural gas
futures confirm the above. At the same time, there is
no statistically significant impact of the pandemic
on the crude oil futures prices on the global market.
We further analyzed the dynamics of price volatility
for metals futures contracts on the global market
(Figure 7).
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Fig. 7: Volatility of metals futures prices on the global market
The data of Figure 8 indicate the high volatility of
the metals futures contract prices during global
economic downturns. In particular, the period 2008-
2009 was characterized by high volatility, when
metals demand dropped significantly on the global
market. According to the charts, the global market
didn’t see any abnormal spikes in the volatility of
the metals futures contract prices in 2020-2021.
Figure 9 shows the volatility of the fertilizer futures
contract prices on the global market.
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Fig. 8: Fertilizer futures contract prices on the global market
Fig. 9: Volatility of the agricultural futures contract price on the global market
The data of Figure 9 demonstrate almost no
fertilizer price volatility throughout periods of
economic growth in the world economy. The only
exceptions were the periods of crises of 2008 and
2011. In general, we can state that the market for
fertilizer futures contracts on the global market is
not volatile. Figure 9 illustrates the volatility of the
agricultural futures contract price on the global
market.
Figure 9 illustrates high volatility of the beverage
and raw materials futures prices, which is typical
not only for periods of economic downturn. Food
futures with fluctuations averaging 10% showed
slightly less volatility. Table 5 contains a detailed
analysis of the impact of the COVID-19 pandemic
on the non-energy futures prices.
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Table 5. Impact of the COVID-19 pandemic on the volatility of metals, fertilizer and agricultural futures prices
on the global market Model 5: OLS, using observations 2000:01-2021:12 (T = 264).
Dependent variable
Coefficient
Std. Error
t-ratio
p-value
R-squared
Metal
Volatility Price Aluminum
1.74595
1.02321
1.706
0.0891
0.011033
Volatility Price Iron Ore
0.827845
2.09176
0.3958
0.6926
0.000600
Volatility Price Copper
1.32417
1.34947
0.9813
0.3274
0.003676
Volatility Price Lead
0.0745767
1.49759
0.04980
0.9603
0.000010
Volatility Price Tin
3.04797
1.30833
2.330
0.0206**
0.020371
Volatility Price Nickel
1.07103
1.79377
0.5971
0.5510
0.001364
Volatility Price Zinc
1.32906
1.37396
0.9673
0.3343
0.003572
Fertilizers
Volatility Price Phosphate
3.13397
2.45050
1.279
0.2021
0.006228
Volatility Price Potassium Chloride
−1.43663
1.91411
−0.7505
0.4536
0.002154
Agriculture
Volatility Beverages Index
0.916040
0.795709
1.151
0.2507
0.005052
Volatility Food Index
0.964756
0.664179
1.453
0.1475
0.008019
Volatility Raw Materials Index
0.194339
0.466689
0.4164
0.6774
0.000664
The metrics in Table 5 demonstrate that the
COVID-19 pandemic had a statistically significant
impact on the volatility of tin futures prices only
among all non-energy commodities, which is
confirmed by the p-value of 0.0206. The pandemic
had no significant impact on volatility for all other
commodities. Therefore, volatility is caused by
other factors that are not taken into account in this
model. Figure 10 shows data on the dynamics of
volatility of precious metals futures contract prices
on the global market.
Fig. 10: Volatility of precious metals futures contract prices on the global market
The charts of Figure 10 show relatively stable
volatility of gold futures prices ranging within 10%,
as well as platinum and silver futures prices —
within 20%. There were peak volatility values in the
periods of economic downturn as for other
commodities, but they got out of the general trend.
Table 6 provides a detailed analysis of the impact of
the COVID-19 pandemic on the volatility of the
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Iryna Otenko, Ihor Hrabynskyi,
Alina Lytvynenko, Elena Lytvynenko,
Mykola Povoroznyk, Dmytro Nikitin
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precious metals futures contract price on the global
market.
Table 6. Impact of the COVID-19 pandemic on the volatility of gold, platinum and silver futures prices on the
global market. Model 6: OLS, using observations 2000:01-2021:12 (T = 264).
Dependent variable
Coefficient
Std. Error
t-ratio
p-value
R-squared
Volatility Price Gold
0.0862393
0.788620
0.1094
0.9130
0.000046
Volatility Price Platinum
−0.109266
1.23811
−0.08825
0.9297
0.000030
Volatility Price Silver
0.810163
1.47026
0.5510
0.5821
0.001162
The data shown in Figures 6-10 allow you to assess
the volatility of prices for different groups of goods
on the international market. Comparing the peak
periods of volatility with the peaks of the outbreak
of the pandemic allows a better understanding of the
impact of the pandemic on international trade and
the role of financial instruments in minimizing risks.
Model 6 metrics show that there is no statistically
significant impact of the pandemic on the volatility
of precious metals futures contract prices. This
indicates that the prices for precious metals were
relatively stable on the global market; price stability
is not crisis-dependent in the long run.
5 Discussion
Authors [19] studied the effect of the pandemic on
the use of financial instruments and found that
changes in financial quotations during the 2020
economic downturn were much greater than during
previous crises. The authors emphasize with their
finding that the COVID-19 pandemic has no
analogues. Our study also confirms the high
volatility of futures on major commodity groups that
are objects of international trade.
Many countries impose restrictions on the export of
agricultural products to meet their own food needs.
For example, Kazakhstan banned the export of
wheat flour and other food commodities in March
2020 [20]. International commodity trade volumes
reduced by 8%, trade in commercial services — by
21% year-over-year 2020/2019 because of the
quarantine restrictions imposed by the COVID-19
pandemic. The total exports volumes reduced by
7.7% and exports of industrial goods — by 5.2% in
2020. Besides, the reports of international
organizations emphasize a significant reduction in
international trade volumes because of the pandemic
[21], [22], [23]. This resulted in the increased
futures volatility on the global market, as evidenced
by our research results. We found that the pandemic
factor is one of the reasons underlying the financial
futures volatility.
Commodity price fluctuations on the international
market are an important factor in the
macroeconomic environment of countries that are
dependent on the export of certain commodities
[24]. For example, oil-producing countries are
dependent on the price of oil on the global market
[25]. The price volatility for their export
commodities can have quite unpredictable
consequences for such countries. Our study
confirms this finding, as futures for certain
commodities (such as metals, coal and natural gas)
are experiencing an increasing volatility because of
the pandemic.
According to authors [26], the COVID-19 pandemic
made the interdependence of financial markets of
different countries even more acute. Besides, the
authors found that the stock market and the gold
market are more popular and attractive than the
crude oil market, especially during the COVID-19
crisis. These findings are explained by decreasing
oil demand during crises, which results in a
decreased investment attractiveness. Our research
confirms these findings, as we established that the
pandemic did not have a significant impact on
precious metals futures.
The organization [27] notes some financial markets
maintain pro-cyclicality. Those markets are
characterized by increased asset demand when it
declines on other markets. We also indicated that in
our research, as the pandemic has made significant
changes in global supply chains, entailing shifts in
commodity flows. Authors [28] write that global
financial markets have experienced significant
volatility since the onset of the pandemic crisis. This
effect was mainly caused by the pessimistic investor
sentiments and the increasing number of confirmed
Covid-19 cases. This research did not take into
account the number of Covid-19 cases, but the
obtained results prove the importance of the
pandemic factor for the futures price on the global
financial market.
Authors [29] studied overturning crisis
developments between the financial markets of
different countries exemplified by China’s
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Iryna Otenko, Ihor Hrabynskyi,
Alina Lytvynenko, Elena Lytvynenko,
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economy. The authors found that China’s financial
market started to suffer negative effects just days
after China’s official announcement of an outbreak
of the pandemic. The spread of crisis developments
over other financial markets around the world was
the secondary effect. The authors emphasize that the
spread of volatility caused by the COVID-19
pandemic is stronger than that caused by the
pandemic of influenza of different strains [30]. The
same effects of the COVID-19 pandemic on the rate
of turbulence in financial markets are reported by
the authors of other studies [31], [32], [33], [34].
The results that we obtained in this study also
confirm the statistical significance of the pandemic
for the most important commodity groups for the
world economy — energy and metals. So, our study
confirms the significant impact of the pandemic on
the world economy, and details the pandemic’s
contribution to futures volatility for major
commodity groups in the global market.
6 Conclusion
The COVID-19 pandemic has undermined global
supply chains, thus entailing a rapid rise in prices on
the global commodity market. The pandemic has
also affected the price of futures contracts as the
main financial instrument for international trade.
The aim of the study was to measure the impact of
the COVID-19 pandemic on the dynamics of
financial instruments in world trade. The results of
our study demonstrated that the pandemic had a
statistically significant impact on the price of the
following commodities on the world market: coal,
all metals except nickel, beverages, food, gold and
silver. We also found that the pandemic had a
significant impact on the volatility of futures prices
for the following commodity groups: coal, natural
gas, and tin. We also established that the pandemic
had a significant impact on the volatility of futures
prices for the following commodity groups: coal,
natural gas, and tin. The obtained results show that
the COVID-19 pandemic had a significant impact
on increased prices for the major commodity groups
that represent competitive markets. Nevertheless,
the pandemic had no impact on pricing or price
volatility of crude oil futures. The reason is that oil
is often used as an economic tool of confrontation in
the geopolitical arena, so the price is set on the basis
of political factors, not on the basis of supply and
demand in the global market. The results obtained
can be used in the analysis of the dynamics of
futures contracts for different commodity groups.
The research findings can be used to develop
macroeconomic arrangements in order to respond to
crises in the world economy and to forecast futures
price vectors. This study opens up new lines of
research, in particular the impact of the COVID-19
pandemic on the supply and demand structure in
global commodity markets.
The obtained results are interesting because they
demonstrate financial instruments' ability to
minimize the pandemic's impact on international
trade. The practical aspects of the obtained results
are that using the received data, companies can use
them in developing strategies for foreign economic
trade operations in terms of developing appropriate
tools for minimizing risks due to outbreaks of the
coronavirus pandemic.
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Alina Lytvynenko, Elena Lytvynenko,
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Mykola Povoroznyk, Dmytro Nikitin
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