Connectedness Between Green Financial and Cryptocurrency Markets: A Multivariate Analysis Using TVP-VAR Model and Wavelet-Based VaR Analysis

Lamia Sebai and Yasmina Jaber ()
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Lamia Sebai: RED-Lab, Higher Institute of Management, University of Gabès, Jilani Habib Street, Gabès 6002, Tunisia
Yasmina Jaber: RED-Lab, Higher Institute of Management, University of Gabès, Jilani Habib Street, Gabès 6002, Tunisia

JRFM, 2025, vol. 18, issue 9, 1-19

Abstract: This paper examines the interconnection and wavelet coherence between the green cryptocurrency market and the green conventional market, utilizing daily data. The research period covers 1 July 2020 to 30 September 2024. Employing the time-varying parametric vector autoregression (TVP-VAR) model and wavelet coherence analysis, we capture both short- and long-term spillovers across markets. The results show that cryptocurrencies, particularly Binance and Litecoin, act as dominant transmitters of volatility and return shocks, while green conventional indices function mainly as receivers with strong self-dependence. Spillover intensity is highly time-varying, with peaks during periods of systemic stress, particularly during the COVID-19 pandemic, and troughs indicating diversification opportunities. These findings advance the literature on systemic risk and portfolio design by showing that crypto assets can simultaneously amplify vulnerabilities and enhance diversification when combined with green finance instruments. For policy, the results highlight the need for regulatory frameworks that integrate sustainability taxonomies, mandate environmental disclosures for digital assets, and incentivize energy-efficient blockchain adoption to align crypto markets with sustainable finance objectives. This research enhances our understanding of the interrelationship between green investments and cryptocurrencies, providing valuable insights for investors and policymakers on risk management and diversification strategies in an increasingly sustainable financial landscape.

Keywords: wavelet analysis; green financial market; cryptocurrency market; TVP-VAR connectedness (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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