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Central bank green communication and pollution premium: Evidence from China

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  • Chen, Yiyao
  • Jiang, Fuwei
  • Zhang, Huajing

Abstract

We explore the role of central bank communication on green finance policy in shaping pollution premium in the Chinese stock market. To measure the focus of central bank on green development, we construct a green communication index using monetary policy implementation reports based on text analysis. We find that central bank green communication increases expected returns for highly-polluting firms. This conclusion remains valid after a series of robustness tests. Mechanism analysis reveals that central bank green communication increases polluting firms' risk exposure, tightens commercial banks' lending restrictions, and shifts investors' green preferences. Heterogeneous analysis shows that the effect is more pronounced for high-profit and low-ESG stocks. Overall, our findings indicate a positive role of central banks in enhancing the extent to which financial markets price pollution risk through central bank green communication.

Suggested Citation

  • Chen, Yiyao & Jiang, Fuwei & Zhang, Huajing, 2026. "Central bank green communication and pollution premium: Evidence from China," Emerging Markets Review, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:ememar:v:70:y:2026:i:c:s1566014125001438
    DOI: 10.1016/j.ememar.2025.101394
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    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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