ABSTRACT
Wavelet power spectrum (WPS) and wavelet coherence analyses (WCA) are used to examine the co-movements among oil prices, green bonds, and CO2 emissions on daily data from January 2014 to October 2022. The WPS results show that oil returns exhibit significant volatility at low and medium frequencies, particularly in 2014, 2019-2020, and 2022. Also, the Green Bond Index presents significant volatility at the end of 2019-2020 and the beginning of 2022 at low, medium, and high frequencies. Additionally, CO2 futures' returns present high volatility at low and medium frequencies, expressly in 2015-2016, 2018, the end of 2019-2020, and 2022. WCA's empirical findings reveal (i) that oil returns have a negative impact on the Green Bond Index in the medium term. (ii) There is a strong interdependence between oil prices and CO2 futures' returns, in short, medium, and long terms, as inferred from the time-frequency analysis. (iii) There also is evidence of strong short, medium, and long terms co-movements between the Green Bond Index and CO2 futures' returns, with the Green Bond Index leading.
ABSTRACT
Green bonds play a pivotal role in the financing of sustainable infrastructure systems. Likewise, CO2 emissions and oil prices can cause an impact on the green bonds market. In order to better understand this issue, this study analyzes the relationship among green bonds, CO2 futures' prices, and oil prices using a daily data set that includes 2,206 observations corresponding to daily information from 1 January 2014 to 15 June 2022. The Granger Causality Test and the Dynamic Conditional Correlation (DCC-Garch) Model were employed to conduct this analysis. Furthermore, a sensitivity analysis was performed to identify crisis periods concerning the sample period and provide an analysis of DCC-Garch results during extreme market conditions like the COVID-19 pandemic and the Russian invasion of Ukraine. The Granger Causality Test results present a unidirectional causality running from the Green Bond Index to the oil price returns. Also, there is a unidirectional causality running from the Green Bond Index to the CO2 futures' returns. Additionally, a unidirectional causality runs from the oil price returns to the CO2 futures' returns. The results for the DCC-Garch indicate a positive dynamic correlation between the Brent oil price return and the CO2 futures' returns. Finally, the Green Bond Index shows a negative dynamic correlation to the oil return and the CO2 futures' returns presenting a strong correlation in uncertainty periods.