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Green finance and natural resources commodities prices: Evidence from COVID-19 period

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  • Xiang, Shihui
  • Cao, Yanyan

Abstract

The present study empirically probed into non-linear associations between natural resources commodity prices and green finance measured in terms of green bonds. Although the literature has sufficient evidences for the association of energy stocks and precious metals like gold and silver with green bond market, however, the number of studies investigating the relationship between natural resources like oil prices, natural gas prices and coal prices are very scarce. Therefore our study accompanies those few studies that tried to explore this association. For empirical estimation, the QARDL estimation approach followed by Wald test as well as Granger causality tests is employed to analyze the daily global data, spanning over Jan 2010 to Dec 2021. The results of our empirical calculations show that over the long term, green bonds are strongly and favourably correlated with rising oil prices at all quantiles. However, only at medium to higher quantiles are natural gas prices and coal prices highly correlated with green bonds (in a negative and positive manner, respectively). i.e., (0.05–0.40). Oil prices and natural gas has significant impact on green bonds only at low quantiles (positive and negative, respectively), while coal prices have significant (positive impact) on green bonds at all quantiles. The error correction term fulfills all the requirements i.e., it is significant and negative, which shows that there exists a long term stable association between the studied variables and the green bonds globally. Moreover, the Granger causality test shows the presence of the bi-directional associations between the prices of these resources with green bonds. This research offers a number of policy proposals to assist governments, decision makers and investors in making better green bond market decisions.

Suggested Citation

  • Xiang, Shihui & Cao, Yanyan, 2023. "Green finance and natural resources commodities prices: Evidence from COVID-19 period," Resources Policy, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:jrpoli:v:80:y:2023:i:c:s0301420722006432
    DOI: 10.1016/j.resourpol.2022.103200
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