Exploring the bidirectional causality between green markets and economic policy: Evidence from the time-varying Granger test
Exploring the bidirectional causality between green markets and economic policy: Evidence from the time-varying Granger test
The vigorous development of green markets and the effective mitigation of economic policy fluctuations are current hotspots that intrigue our interest in exploring the causal relationships between green market returns and economic policy uncertainty (EPU). Green bonds, corporate environmental responsibility, green technology investment, and the carbon trading market are our research objects to comprehensively understand the interaction among them, from both macro and micro perspectives. Considering the importance of temporal heterogeneity and spillover direction in causation, we employ the time-varying Granger causality method to obtain bidirectional real-time identification. We find that green market returns exhibit a time-varying bidirectional causality with EPU over most of the sample period. In contrast, green markets are more a risk spillover than a recipient. Notably, this causality is vulnerable to exogenous financial risks, especially structural changes caused by the COVID-19 pandemic. Overall, this paper provides insights into the deep-seated causes of price fluctuations, volatile market uncertainty, and the interaction mechanism between them, as well as implications for market participants and policymakers.
Bidirectional causality, EPU, Green markets, Time-varying Granger
88131-88146
Lu, Zudi
4aa7d988-ac2b-4150-a586-ca92b8adda95
1 December 2022
Lu, Zudi
4aa7d988-ac2b-4150-a586-ca92b8adda95
Lu, Zudi
,
Xiong Wang, Jingyao Li and Xiaohang Ren
(2022)
Exploring the bidirectional causality between green markets and economic policy: Evidence from the time-varying Granger test.
Environmental Science and Pollution Research, 29 (58), .
(doi:10.1007/s11356-022-21685-x).
Abstract
The vigorous development of green markets and the effective mitigation of economic policy fluctuations are current hotspots that intrigue our interest in exploring the causal relationships between green market returns and economic policy uncertainty (EPU). Green bonds, corporate environmental responsibility, green technology investment, and the carbon trading market are our research objects to comprehensively understand the interaction among them, from both macro and micro perspectives. Considering the importance of temporal heterogeneity and spillover direction in causation, we employ the time-varying Granger causality method to obtain bidirectional real-time identification. We find that green market returns exhibit a time-varying bidirectional causality with EPU over most of the sample period. In contrast, green markets are more a risk spillover than a recipient. Notably, this causality is vulnerable to exogenous financial risks, especially structural changes caused by the COVID-19 pandemic. Overall, this paper provides insights into the deep-seated causes of price fluctuations, volatile market uncertainty, and the interaction mechanism between them, as well as implications for market participants and policymakers.
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Accepted/In Press date: 22 June 2022
e-pub ahead of print date: 13 July 2022
Published date: 1 December 2022
Additional Information:
Funding Information:
This paper was funded by National Natural Science Foundation of China (Nos.72131011) and the Natural Science Fund of Hunan Province (2022JJ40647).
Publisher Copyright:
© 2022, The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.
Keywords:
Bidirectional causality, EPU, Green markets, Time-varying Granger
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Local EPrints ID: 468544
URI: http://eprints.soton.ac.uk/id/eprint/468544
ISSN: 0944-1344
PURE UUID: 0b4e4e68-90ed-4541-9297-34061824395a
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Date deposited: 17 Aug 2022 17:14
Last modified: 17 Mar 2024 07:25
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Corporate Author: Xiong Wang
Corporate Author: Jingyao Li
Corporate Author: Xiaohang Ren
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