Examining Dynamic Connectedness between Green Bonds and Traditional Assets Volatility During Black-Swan Events : A New TVP-VAR Frequency Connectedness Approach

We investigate the volatility connectedness between US green bonds and several major traditional financial market volatility indices through the application of a novel TVP-VAR frequency connectedness. 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 illegal invasion of Ukraine. 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, with specific relevance to policymakers and market participants