Dynamic spillovers between uncertainties and green bond markets in the US, Europe, and China: Evidence from the quantile VAR framework

Abstract

This paper investigates the quantile connectedness between uncertainties and green bonds in the US, Europe, and China by using a quantile VAR model-based connectedness approach. The empirical findings suggest that the spillover effect under extreme market conditions is significantly higher than that under normal market conditions. We also show that stock market uncertainty (VIX) and oil market uncertainty (OVX) have a greater impact on green bonds, especially in extreme upward markets. In addition, the US is the dominant transmitter of spillovers in other green bond markets, while China is always the net receiver of spillovers. Further research, meanwhile, demonstrates that the connectedness between green bonds and uncertainties is time-varying and that the spillover effects at extreme upper and lower quantiles are asymmetric and heterogeneous, especially in the early days of the COVID-19 pandemic. These findings provide investors and policymakers with systematic insights into the risk resistance of different green bond markets.