The Extended Joint Connectedness TVP-VAR Approach for Examining Policy, Financial, and Energy Uncertainties on Green Bonds
The Extended Joint Connectedness TVP-VAR Approach for Examining Policy, Financial, and Energy Uncertainties on Green Bonds

Summary/Abstract: This study explores the time-varying and directional connectedness of the United States and China green bond markets in response to multidimensional uncertainty. By jointly examining two leading green bond markets, the analysis offers a comparative perspective on how spillovers evolve across different institutional and market settings. Uncertainty measures are organized into three mechanism-based channels, policy related uncertainty (EPU, GPR, CPU), financial market uncertainty (VIX, MOVE), and energy market uncertainty (OVX), to facilitate interpretation and comparative inference. The empirical analysis applies a TVP-VAR-based extended joint connectedness scheme to trace evolving spillovers over the 2014 to 2024 period. Empirical findings reveal a moderate level of connectedness between green bond markets and the three uncertainty channels, with financial market volatility being the most dominant transmission mechanism. Political uncertainty demonstrates more variable and time-contingent effects, while energy marketbased uncertainty exhibits context-sensitive and alternating impacts. Beyond documenting average connectedness, the results indicate that the net transmitter and net receiver roles of markets and uncertainty channels change across subperiods, underscoring the importance of accounting for evolving regimes when assessing spillovers. Overall, this study strengthens dynamic connectivity findings with a channel-focused mechanism perspective and provides comparative insights into how leading green bond markets react to evolving uncertainty dynamics.

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