Determining dependence, centrality, and dynamic networks between green bonds and financial markets. (15th September 2022)

• Record Type: Journal Article
• Authors: Karim, Sitara; Naeem, Muhammad Abubakr; Hu, Min; Zhang, Dayong; Taghizadeh–Hesary, Farhad
• Is Part Of: Journal of environmental management. Volume 318(2022)
• Publication Date: 2022-09-15
• Subjects: Centrality -- Dependency networks -- Financial markets -- Green bonds; Environmental policy -- Periodicals; Environmental management -- Periodicals; Environment -- Periodicals; Ecology -- Periodicals; 363.705
• DOI: 10.1016/j.jenvman.2022.115618
• Languages: English
• ISSNs: 0301-4797

Abstract

Abstract: We adopted a network approach to examine the dependence between green bonds and financial markets. We first created a static dependency network for a given set of variables using partial correlations. Secondly, to evaluate the centrality of the variables, we illustrated with-in system connections in a minimum spanning tree (MST). Afterward, rolling-window estimations are applied in both dependency and centrality networks for indicating time variations. Using the data spanning January 3, 2011 to October 30, 2020, we found that green bonds and commodity index had positive dependence on other financial markets and are system-wide net contributors before and after COVID-19. Time-varying dynamics illustrated heightened system integration, particularly during the crisis periods. The centrality networks reiterated the leading role of green bonds and commodity index pre- and post-COVID. Finally, rolling window analysis ascertained system dependence, centrality, and dynamic networks between green bonds and financial markets where green bond sustained their positive dependence all over the sample period. Green bonds' persistent dependence and centrality enticed several implications for policymakers, regulators, investors, and financial market participants. Highlights: The dependence between green bonds and financial markets was examined. Green bonds and commodity indices had positive dependence with financial markets. Time-varying dynamics illustrated heightened system integration during the crisis. Centrality networks reiterated the role of green bonds and commodity indices. Green bonds sustained their positive dependence throughout of the study period.