Asymmetric causality of economic policy uncertainty and oil volatility index on time-varying nexus of the clean energy, carbon and green bond

Xiong Wang, Jingyao Li and Xiaohang Ren

International Review of Financial Analysis, 2022, vol. 83, issue C

Abstract: Vigorously developing the clean energy industry, improving the carbon allowance trading scheme, and issuing green bonds can effectively reduce emissions. To this end, this study aims to investigate the time-varying connections among clean energy, carbon, and green bonds through the DCC-MIDAS model, thus providing a bird's-eye view of their dynamic nexus. A non-parametric causality-in-quantile method is also employed to adequately capture the asymmetric causation of economic policy uncertainty (EPU) and the oil volatility index (OVX) on cross-asset correlations under different market conditions. The primary results imply complicated links among these three assets, with alternating positive and negative trends throughout the sample period. Notably, turbulence in financial markets can exacerbate network connectivity, particularly during the COVID-19 pandemic. Moreover, EPU and OVX can serve as strong predictors across various distributions of cross-market connections, which indicates that co-movement between assets is vulnerable to exogenous risks, especially under normal market conditions. Our findings have broader implications for market participants and policymakers.

Keywords: Clean energy; Carbon; Green bond; DCC-MIDAS; Causality-in-quantiles; EPU; OVX (search for similar items in EconPapers)
JEL-codes: C32 P28 Q43 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (49)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:83:y:2022:i:c:s1057521922002605

DOI: 10.1016/j.irfa.2022.102306

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