Asymmetric effects of geopolitical risks and uncertainties on green bond markets

Yumei Tang, Xihui Haviour Chen, Provash Sarker and Sarra Baroudi

Technological Forecasting and Social Change, 2023, vol. 189, issue C

Abstract: This paper examines the asymmetric effects of the United States Economic Policy Uncertainty (USEPU), Geopolitical Threats (GPRT), Geopolitical Acts (GPRA), and the West Texas Intermediate (WTI) crude oil on Green Bond returns. Our study analyses USEPU, GPRT, GPRA, WTI, and Green Bond monthly data from September 2012 to August 2022. By applying the Nonlinear Autoregressive Distributed Lags (NARDL) model, our empirical evidence shows that in the short run, the return on green bonds is negatively affected by an increase in USEPU and GPRA positively affected by an increase in GPRT and WTI. In the long run, the return on green bonds is negatively affected by an increase in USEPU, GPRA, and GPRT but positively affected by WTI. Considering the climate crisis, looking at these findings in the context of green bonds is essential to entice green investments. Policymakers should use our results for a policy design to mitigate green bond market volatility caused by external uncertainties and risks. Furthermore, we conclude that uncertainties should be considered when investing in green bonds and managing investment portfolios.

Keywords: Economic policy uncertainty; Geopolitical threats; Geopolitical acts; WTI; Green bond; NARDL (search for similar items in EconPapers)
JEL-codes: G12 Q41 Q58 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:189:y:2023:i:c:s0040162523000331

DOI: 10.1016/j.techfore.2023.122348

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