Examining Dynamic Connectedness between Green Bonds and Traditional Assets During Crises

We investigate the volatility connectedness between US green bonds and several major traditional financial market volatility indices by applying a novel TVP-VAR frequency connectedness methodology. This paper aims to explore the specific role that the US green bond market possesses during three dynamic events that resulted in substantial financial market instability and discontinuity, such as the US-China trade war, the COVID-19 pandemic, and the Russian-Ukraine conflict. Empirical results highlight that US green bond market is a shock receiver from each of the analysed stock, oil, gold, and exchange rate markets, but rather, is a transmitter of shocks to the cryptocurrency market. Furthermore, we identify significant evidence of strong decoupling of green bond connectedness during the Ukraine crisis. Such findings prove that black swan events have been deeply disruptive to the green transition, specifically relevant to policymakers and market participants