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The role of the COVID-19 pandemic in time-frequency connectedness between oil market shocks and green bond markets: Evidence from the wavelet-based quantile approaches

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  • Wei, Ping
  • Qi, Yinshu
  • Ren, Xiaohang
  • Gozgor, Giray

Abstract

This study contributes to the existing literature on the relationship between oil market shocks and the green bond market by investigating the impact of the COVID-19 pandemic on their dynamic correlation. We first decompose the oil market shocks into components using a time-frequency framework. Then, we combine wavelet decomposition and quantile coherence and causality methods to discuss changes during the COVID-19 era. We observe positive effects of both supply-driven and demand-driven oil shocks on the green bond market at most quantile levels. However, supply-driven oil price changes play a major role. The results also indicate that long-term changes have a greater impact than short-term changes on the connection between oil and green bond markets. Nevertheless, the COVID-19 pandemic changed the nature of the causal relationship, as we observed no relationship under extreme market conditions during the pandemic era. We argue that the economic and social impacts of the COVID-19 pandemic have left investors focusing on the short-term substitution between oil and green bond markets.

Suggested Citation

  • Wei, Ping & Qi, Yinshu & Ren, Xiaohang & Gozgor, Giray, 2023. "The role of the COVID-19 pandemic in time-frequency connectedness between oil market shocks and green bond markets: Evidence from the wavelet-based quantile approaches," Energy Economics, Elsevier, vol. 121(C).
    • Handle: RePEc:eee:eneeco:v:121:y:2023:i:c:s014098832300155x
    DOI: 10.1016/j.eneco.2023.106657
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    More about this item

    Keywords

    Green bond market; Oil market shocks; The COVID-19 pandemic; Quantile coherency; Quantile Granger causality;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • F3 - International Economics - - International Finance
    • F6 - International Economics - - Economic Impacts of Globalization
    • G1 - Financial Economics - - General Financial Markets
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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