Transfer Entropy Causal Networks for Interconnectedness Analysis of Global Banking and Green Markets: A CEEMDAN-SE-KM Approach

In light of growing concerns about sustainable development and green innovation, the green market has progressively taken center stage in the financial markets. From the nonlinear information transmission angle, we look into the interconnectedness between the global banking sectors and the green markets using transfer entropy causal networks, containing the Dow Jones Green Bond Index (SPGB), Dow Jones Sustainability Index (DJSI), The S&P Global Clean Energy Index (SPCL), and MSCI World ESG Leaders Index (ESGL). We observe significant bidirectional causal relationships between two markets. The banking industries of developed nations and emerging economies like South Korea, Indonesia, and India are the most important, while four green markets are vital. Furthermore, using the CEEMDAN-SE-KM approach, this study also investigates the two markets' heterogeneous performance at various time scales. The causal relationships between two markets exhibit heterogeneity at time scales, and that is most noticeable at the short-term scale. Additionally, after the COVID-19 pandemic and the conflict between Russia and Ukraine, there is an increase in the causal relationships between the two markets and a higher efficiency of information transmission. These results help regulatory bodies and green market players have a more thorough understanding of and dynamic regulation of the green market.