The Roles of Economic Policy Uncertainty in Green Bond Market Efficiency: Evidence From QARDL Approach

38 Pages Posted: 19 Feb 2022

See all articles by Ping Wei

Ping Wei

Central South University - School of Business

Jingzi Zhou

Central South University - School of Business

Xiaohang Ren

University of Southampton; Central South University

Date Written: December 10, 2021

Abstract

This paper explores the quantile-specific short and long-term effects of economic policy uncertainty, WTI crude oil price and carbon futures price on the efficiency of the green bond market. The QARDL method is applied to study this problem, considering the nonlinearity, asymmetry, and possible endogenous characteristics. The empirical results show that the effects of economic policy uncertainty, WTI crude oil price and carbon futures price are heterogeneous in different levels of green bond market efficiency. Before COVID-19, an interesting phenomenon was that economic policy uncertainty had a significant positive impact on the efficiency of the green bond market in the middle and low quantiles, which confirmed that under the condition of low uncertainty, green bonds could be used as a diversified investment tool to hedge the rising uncertainty. In addition, the positive impact of WTI crude oil price on the efficiency of the green bond market is greater in the short term. After the occurrence of COVID-19, economic policy uncertainty and WTI crude oil prices will no longer affect the efficiency of the green bond market in the short and long terms because of the failure of the market. While the significant positive effect of carbon emissions price is even stronger than before the COVID-19, which indicates that compared with other factors, the impact of carbon emission price on the efficiency of the green bond market is not affected by COVID-19. These results verify the short and long-term impact of EPU, WTI and CEA on the green bond market efficiency and how these effects are changed with the occurrence of COVID-19.

Keywords: Economic policy uncertainty, WTI crude oil price, Carbon emission price, QARDL

Suggested Citation

Wei, Ping and Zhou, Jingzi and Ren, Xiaohang, The Roles of Economic Policy Uncertainty in Green Bond Market Efficiency: Evidence From QARDL Approach (December 10, 2021). Available at SSRN: https://ssrn.com/abstract=3989911

Ping Wei

Central South University - School of Business

Changsha, Hunan 410083
China

Jingzi Zhou

Central South University - School of Business

Changsha, Hunan 410083
China

Xiaohang Ren (Contact Author)

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

Central South University ( email )

Changsha, Hunan 410083
China

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