Determining dependence, centrality, and dynamic networks between green bonds and financial markets

Sitara Karim, Muhammad Abubakr Naeem, Min Hu, Dayong Zhang, Farhad Taghizadeh-Hesary

Research output: Contribution to journalArticlepeer-review

62 Citations (Scopus)

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.

Original languageEnglish
Article number115618
JournalJournal of Environmental Management
Volume318
DOIs
Publication statusPublished - Sept 15 2022

Keywords

  • Centrality
  • Dependency networks
  • Financial markets
  • Green bonds

ASJC Scopus subject areas

  • Environmental Engineering
  • Waste Management and Disposal
  • Management, Monitoring, Policy and Law

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