Analysis of the effects of pandemics on commodity markets

One of the biggest risks for economies in the world is the disruption of production processes as a result of events such as epidemics, wars and economic crises, which directly or indirectly disrupt supply chains. Another risk is the fluctuations in the supply-demand and therefore prices of commodities, which are the most basic inputs of production, in the face of these events. Although epidemics have been seen in every period of history, the loss of life and the measures taken since their emergence cause disruption of social, political and economic functioning. The latest example of this situation is the Covid-19 pandemic that emerged in 2019 and affected the world. . In this study, the impact of pandemics on commodities is analyzed through the Covid-19 pandemic. In the study, the period range was determined as 20.01.2020-31.12.2021 and 20.01.2020-31.12.2020 to represent the beginning and generalization of the Covid-19 pandemic. In the models, global gold, aluminum, iron, copper, WTI oil and natural gas prices are set as dependent variables due to their strategic importance in industrial production, and the global daily number of cases and global daily number of deaths representing Covid-19 data are set as independent variables. In addition, VIX index and MSCI index data are included in the models as explanatory variables. In the study, the stationarity tests of the variables are conducted with (PP) and (ZA) unit root tests. The unit root test results show that the variables are stationary at different degrees. However, the Zivot-Andrews (ZA) unit root test showed that the change in the number of cases on 20.01.2020-31.12.2021 10.05.2021 and the US presidential elections on November 2, 2020 may cause a break in the models to be built for the period 20.01.2020-31.12.2020. In this context, a dummy variable was added to the models for these dates. Due to the stationarity structure of the variables, the long and short-run cointegration relationship between commodity prices and Covid-19 is analyzed by ARDL bounds test.