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A Wavelet Analysis of the Dynamic Connectedness among Oil Prices, Green Bonds, and CO 2 Emissions

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  • Nini Johana Marín-Rodríguez

    (Programa de Ingeniería Financiera, Facultad de Ingenierías, Universidad de Medellín, Medellin 050026, Colombia)

  • Juan David González-Ruiz

    (Departamento de Economía, Facultad de Ciencias Humanas y Económicas, Universidad Nacional de Colombia, Sede Medellín, Medellin 050034, Colombia)

  • Sergio Botero

    (Departamento de Ingeniería de la Organización, Facultad de Minas, Universidad Nacional de Colombia—Sede Medellín, Medellin 050034, Colombia)

Abstract

Wavelet power spectrum (WPS) and wavelet coherence analyses (WCA) are used to examine the co-movements among oil prices, green bonds, and CO 2 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, CO 2 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 CO 2 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 CO 2 futures’ returns, with the Green Bond Index leading.

Suggested Citation

  • Nini Johana Marín-Rodríguez & Juan David González-Ruiz & Sergio Botero, 2023. "A Wavelet Analysis of the Dynamic Connectedness among Oil Prices, Green Bonds, and CO 2 Emissions," Risks, MDPI, vol. 11(1), pages 1-21, January.
    • Handle: RePEc:gam:jrisks:v:11:y:2023:i:1:p:15-:d:1029690
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    References listed on IDEAS

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