Driving green bond market through energy prices, gold prices and green energy stocks: evidence from a non-linear approach

Abstract

One of the most controversial concerns among the researchers is the expansion of the green bond markets, so as to reduce environmental pollution. The present study estimates the factors that help drive the global green bond markets, such as energy prices, gold prices, and green energy stocks. The study has applied Quantile Autoregressive Lagged Approach (QARDL) and Quantile Granger Causality test to estimate the causal relationship among the variables for January 2010 and June 2021. The QARDL findings reveal that for all the quantiles, the error correction term is statistically significant with the predicted negative sign. This confirms the existence of a strong long-run equilibrium relationship between the relevant variables and the green bonds market on a global level. The findings revealed that gold and energy prices have a lower effect on the green bonds market on every quantile, and also from the low to medium quantiles, respectively. While at the same time, the green energy stocks have an increasing effect on the green bonds market at higher quantiles. The results of the causal examination using Granger-causality in quantiles show a bi-directional causal relationship between the green bonds, energy prices, gold prices, and green energy stocks in the world economy.