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Research on the policy effect of central Bank's giving priority to green bonds under the collateral framework

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  • Chen, Ruoyu
  • Zhu, Jingzhi
  • Wang, Xingyu

Abstract

As an important monetary policy tool, the Bank of China has included green bonds in the scope of collateral for MLF. To clarify the effect of this policy, this paper constructs a DSGE model incorporating climate externalities and corporate bond defaults. We find that: (1) The policy can raise the price of green bonds, improve the financing environment of green enterprises and increase the proportion of green capital in society. (2) Due to the possibility of corporate bond default, it may reduce the effectiveness. (3) The Joint effectiveness of monetary policy and carbon-tax policy is better than the single policy.

Suggested Citation

  • Chen, Ruoyu & Zhu, Jingzhi & Wang, Xingyu, 2025. "Research on the policy effect of central Bank's giving priority to green bonds under the collateral framework," Finance Research Letters, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:finlet:v:78:y:2025:i:c:s1544612325003447
    DOI: 10.1016/j.frl.2025.107081
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    References listed on IDEAS

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    1. Schmitt-Grohe, Stephanie & Uribe, Martin, 2007. "Optimal simple and implementable monetary and fiscal rules," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1702-1725, September.
    2. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393, Elsevier.
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    Cited by:

    1. Wang, Shuwen & Yang, Ruiqi & Li, Yanru, 2025. "Collateral reform and firm value: Empirical evidence from the natural experiment of civil code of the PRC," International Review of Financial Analysis, Elsevier, vol. 106(C).
    2. Lucchetta, Marcella, 2025. "Monetary trade-offs: stability vs. renewables," Economics Letters, Elsevier, vol. 257(C).

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