Coal price jumps in China and their impact on the industrial sector

Recent significant fluctuations in China's coal prices have notably impacted economic development. This study examines coal price dynamics and their effects on industry, using data from 2016 to 2024. Initially, an ARMAEGARCH-ARJI model analyzes coal price jumps, followed by dividing the period into two segments to examine these jumps' impacts on industrial indices through GARCH-type models. Key findings include: (1) coal price jumps have become more frequent in recent years; (2) the impact of expected and unexpected coal price shocks on the overall industrial index and sub-sector indices may differ across different time periods, and generally, current period coal price jumps have a negative effect on the overall industrial index and its sub-sectors; (3) for industries such as metal, material, and chemical, expected and unexpected coal shocks mostly have a positive impact, while for the power industry, during the period from October 2019 to August 2024, expected and unexpected coal shocks have a negative impact. This study aims to deeply analyze the volatility risk associated with coal prices and provide effective strategies for the industrial sector to mitigate and manage these risks.