The impact of economic outlook on green fnance: insights from linkages between green and infation‑indexed bonds
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Date
2023
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Environment, Development and Sustainability
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 a reflection 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
According to 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.
Description
Research Article
Keywords
Asset networks, Co-movement, Connectedness analysis