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Can the green bond market enter a new era under the fluctuation of oil price?

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  • Chi Wei Su
  • Yingfeng Chen
  • Jinyan Hu
  • Tsangyao Chang
  • Muhammad Umar

Abstract

This paper investigates how oil price (OP) influences the prospects of green bonds by utilising the quantile-onquantile (QQ) method and researching the interactions between OP and green bond index (GBI) from 2011:M1 to 2021:M11. We find that impacts from OP on the GBI are positive in the short run. The positive effects indicate that high OP can promote the development of the green bond market, indicating that green bonds can be considered an asset to avoid OP shocks. However, in the medium and long term, there is a negative impact due to the oversupply of the oil market and the increase in green energy industry profits. These results are identical to the supply and demand-based correlation model of green bonds and oil price, which underlines a specific effect of OP on GBI. The GBI effect on OP is consistently positive across all quantiles. It indicates that green bonds cannot be considered efficient measures to alleviate the oil crisis due to the instability of the Middle East COVID-19 and the small scale of green bonds. The issuers of green bonds can make decisions based on OP. Understanding the relationship between OP and GBI is also beneficial for investors.

Suggested Citation

  • Chi Wei Su & Yingfeng Chen & Jinyan Hu & Tsangyao Chang & Muhammad Umar, 2023. "Can the green bond market enter a new era under the fluctuation of oil price?," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 36(1), pages 536-561, December.
    • Handle: RePEc:taf:reroxx:v:36:y:2023:i:1:p:536-561
    DOI: 10.1080/1331677X.2022.2077794
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    Cited by:

    1. Liu, Fangying & Qin, Chuan & Qin, Meng & Stefea, Petru & Norena-Chavez, Diego, 2024. "Geopolitical risk: An opportunity or a threat to the green bond market?," Energy Economics, Elsevier, vol. 131(C).
    2. Liu, Fangying & Su, Chi Wei & Qin, Meng & Lobonţ, Oana-Ramona, 2023. "Winner or loser? The bidirectional impact between geopolitical risk and energy transition from the renewable energy perspective," Energy, Elsevier, vol. 283(C).
    3. Duan, Kun & Tan, Jinkui & Ren, Xiaohang & Taghizadeh-Hesary, Farhad, 2024. "How does green investment respond differently to decomposed oil shocks?," Resources Policy, Elsevier, vol. 92(C).

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