Economic policy uncertainty, commodity financialization, and price fluctuations of China’s agricultural commodity futures

This article examines the influence of economic policy uncertainty (EPU) on price volatility in China’s agricultural futures markets, utilizing monthly data from July 2006 to December 2023 and employing a TVP-VAR-SV model, with a focus on the mediating role of commodity financialization. Empirical results reveal: (1) Domestic EPU exerts a stronger influence on agricultural futures volatility than global EPU. (2) Heightened commodity financialization amplifies price fluctuations and serves as a transmission channel for both domestic and global EPU effects. (3) Major unexpected events significantly exacerbate the short-term volatility shocks from EPU. (4) Heterogeneous responses exist across agricultural subsectors: while domestic EPU induces directional and magnitude-divergent impacts on different commodity categories, the mediating effect of financialization varies substantially in transmission mechanisms. These findings underscore the intricate interplay between policy uncertainty, financialization dynamics, and the stability of China’s agricultural commodity market.