Sustainability in shaky times: analysing the resilience of green bonds amid economic policy uncertainty

Abstract

Amid economic policy uncertainty, recognizing green bonds as stabilizing instruments underscores the imperative to address climate change. Existing research assesses the asymmetric effect of economic policy uncertainty on green bonds in the top 10 green bond-issuing countries (China, USA, Spain, France, Japan, Canada, Germany, the Netherlands, the UK, and Sweden). While past investigations have predominantly used panel data methodologies to probe the correlation between economic policy uncertainty and green bonds, it often overlooked the unique disparities among various economies. Contrarily, our approach utilizes the ‘Quantile-on-Quantile’ methodology, which offers a comprehensive global yet country-specific viewpoint for each economy. The study reveals a significant reduction in green bond prices associated with economic policy uncertainty across various quantile levels in most selected economies. Furthermore, our findings underscore the discrepancies in the connections among our variables across different countries. These discoveries stress that policymakers must manage thorough assessments and execute efficient tactics to manage fluctuations in economic policy uncertainty and green bonds at various levels.