Relationship between green bonds and financial and environmental variables: A novel time-varying causality

Shawkat Hammoudeh, Ahdi Noomen Ajmi and Khaled Mokni ()

Energy Economics, 2020, vol. 92, issue C

Abstract: In this paper, we examine the time-varying causal relationship between green bonds and other assets including US conventional bonds, WilderHill clean energy (equity) index, and CO2 emission allowances price during the period spanning from 30 July 2014 to 10 February 2020. We apply the novel time-varying Granger causality test (Shi et al. 2018) based on the recursive evolving algorithm introduced by Phillips et al. (2015a, 2015b) for controlling financial bubbles to detect real–time causality, detecting possible changes in the causal direction and dating financial turbulences, The study based on this algorithm reveals a significant causality running from the US 10-year Treasury bond index to green bonds starting from the end of the year 2016 until the end of the sample period. Besides, we find that the link CO2 emission allowances price causing green bonds is significant from the beginning of the sample period to the end of the year 2015. Furthermore, by using the recursive-evolving causality algorithm of the Shi et al. (2018) test, we find that the causality running from the clean energy index to green bonds is very limited to the year 2019. On the other hand, there is no significant causality running from green bonds to all considered assets, indicating no predictive power for this asset in its proper domain, which is not yet examined in the literature.

Keywords: CO2 emission allowances; Green bonds; Green energy, time-varying causality, recursive-evolving causality (search for similar items in EconPapers)
JEL-codes: C58 G10 G12 Q50 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (98)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988320302814
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:92:y:2020:i:c:s0140988320302814

DOI: 10.1016/j.eneco.2020.104941

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().