Does economic policy uncertainty drive nonlinear risk spillover in the commodity futures market?

We propose the rolling tail-event driven network technique (RTENET) to measure the dynamic nonlinear tail risk spillover of 20 US commodity futures. In addition, we investigate the effect of economic policy uncertainty (EPU) on risk spillover based on quantile-on-quantile regression (QQR). We find that the risk spillover effect increases sharply and that the market is tightly connected when EPU is at a high level. Crude oil, silver and corn, the three greatest risk transmitters in the system, need more attention. More importantly, the effect of EPU on the risk spillover of the commodity futures market is asymmetric and heterogeneous. When the risk spillover falls within extremely high quantiles, a significant positive effect of EPU is observed. In addition, grain and soft crops are more sensitive to EPU. Our findings provide a reference for policy-makers and investors to manage commodity futures markets in different uncertainty periods.