The resilience of green bonds to oil shocks during extreme events

Rehman, Mobeen Ur; Nautiyal, Neeraj; Zeitun, Rami; Vo, Xuan Vinh; Ghardallou, Wafa

Abstract

Investments in green energy are increasing exponentially due to rising environmental concerns. Our work scrutinizes the influence of decomposed structural oil shocks on the green bonds in developed countries from November 28, 2008 to May 21, 2021. We use contemporary time-varying methodologies including nonlinear causality and rolling window wavelet correlation tests. We find that green bonds remain strongly correlated with demand and supply shocks in the long run, particularly the green bonds in the UK, US, Japan, and Switzerland during the crisis periods. Japan shows a strong positive correlation with demand shocks over the long run but negative correlation in the short run. In contrast, Norway, New Zealand, and Sweden's green bonds have a positive correlation with supply and demand shocks during the short-run period. Our results carry useful implications for investors and policymakers.

Citation

Rehman, M. U., Nautiyal, N., Zeitun, R., Vo, X. V., & Ghardallou, W. (in press). The resilience of green bonds to oil shocks during extreme events. Journal of Environmental Management, 378(April 2025), 1-18. https://doi.org/10.1016/j.jenvman.2025.124685

• Journal Article Type: Article
• Acceptance Date: Feb 20, 2025
• Online Publication Date: Mar 3, 2025
• Deposit Date: Mar 12, 2025
• Journal: Journal of Environmental Management
• Print ISSN: 0301-4797
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 378
• Issue: April 2025
• Article Number: 124685
• Pages: 1-18
• DOI: https://doi.org/10.1016/j.jenvman.2025.124685
• Keywords: Green bonds, Oil shocks, Wavelet correlation, Nonlinear causality
• Public URL: https://keele-repository.worktribe.com/output/1105329