Does Economic Policy Uncertainty Affect Green Bond Markets? Evidence from Wavelet-Based Quantile Analysis

Ping Wei, Yinshu Qi, Xiaohang Ren and Kun Duan

Emerging Markets Finance and Trade, 2022, vol. 58, issue 15, 4375-4388

Abstract: This paper investigates the wavelet-based quantile dependence between Economic Policy Uncertainty (EPU) and green bond markets over 2014–2021. We first determine how the connectivity between EPU and green bonds differs across different investment horizons by decomposing EPU and green bond series into various frequency bands. Next, we provide a quantile-based framework to characterize the reliance between EPU and green bond markets across various market circumstances. Our findings show that the Granger causality from EPU to the green bond market is non-linear and varies across time scales. Our results benefit policymakers with a policy design to mitigate systematic volatility caused by external shocks in the green bond markets.

Date: 2022
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DOI: 10.1080/1540496X.2022.2069487

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