Multivariate regression analysis of macroeconomic factors influencing green bond yields
Keywords:
Green Bonds, Macroeconomic Factors, Bond Yields, Multivariate Regression, Sustainable Finance, Interest Rates, InflationAbstract
The rapid expansion of the green bond market has positioned it as a critical instrument for financing sustainable development and climate transition initiatives. Despite its growing importance, the determinants of green bond yields remain insufficiently explored, particularly from a macroeconomic perspective. This study investigates the influence of key macroeconomic factors on green bond yields using a multivariate regression framework. Specifically, it examines the impact of interest rates, inflation, gross domestic product (GDP) growth, exchange rates, and oil prices on yield behavior. Using panel data covering the period 2015–2025, the study employs ordinary least squares (OLS) and robustness checks to assess the statistical significance and direction of relationships between macroeconomic variables and green bond yields. The findings indicate that interest rates and inflation exert a strong positive influence on yields, reflecting the sensitivity of green bonds to broader monetary conditions. GDP growth demonstrates a negative relationship, suggesting that stronger economic performance reduces perceived risk and lowers yields. Exchange rate depreciation and oil price fluctuations also exhibit moderate but significant effects. The results contribute to the emerging literature on sustainable finance by providing empirical evidence on the macroeconomic drivers of green bond pricing.
Downloads
References
1. Apergis, N., & Payne, J. E. (2014). Renewable energy, output, CO₂ emissions, and fossil fuel prices. Energy Economics, 42, 1–6.
2. Arif, M., Hasan, M., & Alawi, S. M. (2021). Macroeconomic determinants of bond yields in emerging markets. International Review of Economics & Finance, 74, 343–356.
3. Baker, M., Bergstresser, D., Serafeim, G., & Wurgler, J. (2018). Financing the response to climate change: The pricing and ownership of U.S. green bonds. Journal of Financial Economics, 130(1), 1–26.
4. Batten, J. A., & Vo, X. V. (2019). Determinants of bond yields in emerging markets. Journal of Risk and Financial Management, 12(3), 1–15.
5. Bernanke, B. S., & Blinder, A. S. (1992). The federal funds rate and the channels of monetary transmission. American Economic Review, 82(4), 901–921.
6. Bhattacharyya, M., & Kassa, H. (2020). Green finance and economic growth. Energy Policy, 143, 111–120.
7. Bouri, E., Naeem, M. A., Nor, S. M., Mbarki, I., & Saeed, T. (2022). Government green bonds and the COVID-19 crisis. Finance Research Letters, 45, 102–120.
8. Broadstock, D. C., Cheng, L. T., & Zhang, D. (2020). The role of ESG performance in green bond markets. Finance Research Letters, 38, 101–492.
9. Climate Bonds Initiative. (2023). Green bond market summary report 2023—Climate Bonds Initiative.
10. Dai, X., & Zhang, Z. (2023). Green bond market development and macroeconomic factors: Evidence from global markets. Journal of Cleaner Production, 385, 135–149.
11. Ding, H., & Ren, X. (2023). Climate risk and green bond pricing. Journal of Environmental Economics and Management, 117, 102–210.
12. Engle, R. F., & Granger, C. W. J. (1987). Co-integration and error correction: Representation, estimation, and testing. Econometrica, 55(2), 251–276.
13. Estrella, A., & Hardouvelis, G. A. (1991). The term structure is a predictor of real economic activity. Journal of Finance, 46(2), 555–576.
14. Fama, E. F. (1981). Stock returns, real activity, inflation, and money. American Economic Review, 71(4), 545–565.
15. Fisher, I. (1930). The theory of interest. Macmillan.
16. Flammer, C. (2021). Corporate green bonds. Journal of Financial Economics, 142(2), 499–516.
17. Gujarati, D. N., & Porter, D. C. (2009). Basic econometrics (5th ed.). McGraw-Hill.
18. Hachenberg, B., & Schiereck, D. (2018). Are green bonds priced differently from conventional bonds? Journal of Asset Management, 19(6), 371–383.
19. Huang, Y., & Chen, C. (2022). Inflation and bond market dynamics. Journal of International Financial Markets, Institutions and Money, 78, 101–562.
20. International Energy Agency. (2022). World Energy Outlook 2022. IEA.
21. Iqbal, N., & Bilal, A. R. (2021). Macroeconomic variables and bond yield volatility. Economic Research-Ekonomska Istraživanja, 34(1), 1–20.
22. Khan, M., & Ozturk, I. (2021). Macroeconomic stability and sustainable finance. Sustainability, 13(5), 1–15.
23. Kilian, L. (2009). Not all oil price shocks are alike: Disentangling demand and supply shocks in the crude oil market. American Economic Review, 99(3), 1053–1069.
24. Le, T. H., & Nguyen, C. P. (2020). The impact of oil prices on financial markets. Energy Economics, 88, 104–771.
25. Liu, N., Tang, Y., & Zhang, J. (2022). Green bond pricing and macroeconomic uncertainty. Energy Economics, 110, 106–118.
26. Markowitz, H. (1952). Portfolio selection. Journal of Finance, 7(1), 77–91.
27. Mishkin, F. S. (2019). The economics of money, banking, and financial markets (12th ed.). Pearson.
28. Nanayakkara, M., & Colombage, S. (2019). Do investors value sustainability? A comparative study of green and conventional bonds. Journal of Sustainable Finance & Investment, 9(2), 181–202.
29. Nguyen, T. T., Naeem, M. A., Balli, F., Balli, H. O., & Vo, X. V. (2021). Time-frequency comovement among green bonds, stocks, commodities, clean energy, and conventional bonds. Finance Research Letters, 40, 101–739.
30. OECD. (2023). Green finance and investment report 2023 OECD Publishing.
31. Pham, L. (2016). Is it risky to go green? A volatility analysis of the green bond market. Journal of Sustainable Finance & Investment, 6(4), 263–291.
32. Reboredo, J. C. (2018). Green bond and financial markets: Co-movement, diversification and price spillover effects. Energy Economics, 74, 38–50.
33. Sadorsky, P. (2014). The effect of oil price volatility on financial markets. Energy Economics, 43, 72–81.
34. Shiller, R. J. (2015). Irrational exuberance (3rd ed.). Princeton University Press.
35. Tang, D. Y., & Zhang, Y. (2020). Do shareholders benefit from green bonds? Journal of Corporate Finance, 61, 101–427.
36. UNEP. (2022). Global trends in renewable energy investment 2022. United Nations Environment Program.
37. Wang, Y., Chen, Z., & Liu, F. (2023). Macroeconomic determinants of green bond yields: Evidence from emerging markets. Emerging Markets Review, 55, 100–120.
38. World Bank. (2023). Global economic prospects report. World Bank.
39. Zerbib, O. D. (2019). The effect of pro-environmental preferences on bond prices: Evidence from green bonds. Journal of Banking & Finance, 98, 39–60.
40. Zhang, B., & Zhou, Y. (2021). Green bond issuance and corporate environmental performance. Business Strategy and the Environment, 30(6), 2851–2867.
41. Zhou, X., Cui, Y., & Wang, S. (2022). The impact of macroeconomic factors on bond markets. Economic Modeling, 108, 105–112.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 The International tax journal
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
