Analysis of Green Bond Yields in Different Economic Regimes: High and Low Interest Rates

Ivancevic Milo ()
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Ivancevic Milo: PhD student, Faculty of Economics and Business, University of Belgrade.

Zagreb International Review of Economics and Business, 2024, vol. 27, issue 2, 7-26

Abstract: In recent years, green bonds have emerged as a significant financial instrument, attracting considerable attention as a means of financing environmentally sustainable projects. This research aims to examine whether there is a statistically significant difference in the returns of green and conventional bonds in international markets under two different stages of the economic cycle, low and high interest rate regimes. The study was conducted based on the bond matching method, where bonds with identical characteristics are considered, except for one, whether or not the bond is green. The results of this study demonstrate the existence of a green premium in both economic regimes. Additionally, an increase in the green premium was identified in the regime of positive interest rates. Considering the observed differences in the green premium across different sectors, it seems that the theory of lower risk of green bonds best explains the reason for the greenium.

Keywords: Green Bonds; Returns; Premium; Interest Rates (search for similar items in EconPapers)
JEL-codes: C58 G15 Q56 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:zirebs:v:27:y:2024:i:2:p:7-26:n:1001

DOI: 10.2478/zireb-2024-0015

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