Examining the interconnectedness of green finance: an analysis of dynamic spillover effects among green bonds, renewable energy, and carbon markets

There is growing importance of green finance as a means to finance sustainable projects and reduce carbon emissions. Green bonds have emerged as an important financing tool in this context, and there is a need to understand how they are interconnected with other components of the green finance ecosystem, such as renewable energy and carbon markets. This study investigates the interconnectivity of green finance by analyzing the dynamic spillover effects among green bonds, renewable energy stocks, and carbon markets. Using daily data spanning from January 2010 to December 2020, vector autoregressive models and time-varying parameter models are applied to examine the transmission channels of shocks among these assets. The results reveal significant dynamic spillover effects between green bonds and renewable energy stocks, as well as between carbon markets and renewable energy stocks. Additionally, the findings suggest a complementary relationship between green bonds and carbon markets. This study provides insights into the interdependence of different green financial instruments and their role in promoting sustainable development. The outcomes of the research can guide policymakers, investors, and other stakeholders in making informed decisions regarding green finance.

Automated summary

There is growing importance of green finance as a means to finance sustainable projects and reduce carbon emissions. Green bonds have emerged as an important financing tool in this context, and this study investigates their interconnectedness with renewable energy stocks and carbon markets. The results reveal significant dynamic spillover effects between green bonds and renewable energy stocks, as well as between carbon markets and renewable energy stocks. This study provides insights into the interdependence of different green financial instruments and their role in promoting sustainable development.