The impact of economic outlook on green finance: insights from linkages between green and inflation-indexed bonds

TN-Lan Le (), John W. Goodell (), Rabeh Khalfaoui (), Emmanuel Joel Aikins Abakah () and Buhari Doğan ()
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TN-Lan Le: The University of Sydney
John W. Goodell: The University of Akron
Rabeh Khalfaoui: CEREFIGE
Emmanuel Joel Aikins Abakah: University of Ghana Business School

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2025, vol. 27, issue 3, No 34, 6507-6538

Abstract: Abstract While inflation-indexed bonds focus on mitigating the impact of inflation and preserving the purchasing power of investors, green bonds prioritize investments in environmentally responsible projects. These bond types offer distinct investment opportunities that cater to the diverse preferences and objectives of investors. With this in mind, this study aims to explore the dynamic relationship between inflation-indexed bonds and green bonds using wavelet analysis, quantile regression, and the Diebold-Yilmaz procedures for the period spanning October 2016 to January 2021. By considering green bonds as indicative of green energy outlooks and inflation-indexed bonds as reflective of overall economic conditions, we investigate the hypothesis that inflation-indexed bonds dominate green bonds within a sample of emerging markets. Our findings reveal significant interdependence between green bonds and inflation-indexed bonds across various wavelet time scales. Consistent with recent research, inflation-indexed bonds exhibit a dominant influence on the relationship, while the nature of this dependence alternates between positive and negative. Furthermore, quantile connectedness analysis demonstrates that spillover transmissions are more pronounced during extreme positive and negative market conditions. The outcomes of this study hold relevance for both investors and policymakers alike.

Keywords: Green finance; Green bonds; Inflation-indexed bonds; Co-movement; Wavelet analysis; Connectedness analysis; Asset networks; E20; F21; G11 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10668-023-04153-5

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