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Green Stocks and Monetary Policy Shocks: Evidence from Europe

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  • Bauer, Michael
  • Offner, Eric
  • Rudebusch, Glenn

Abstract

Policymakers and researchers worry that the low-carbon transition may be inadvertently delayed by higher global interest rates. To examine whether green investment is especially sensitive to interest rate increases, we consider the effect of unanticipated monetary policy changes on the equity prices of green and brown European firms. We find that brown firms, measured in terms of carbon emission levels or intensities, are more negatively affected than green firms by tighter monetary policy. This heterogeneity is robust to different monetary policy surprises, emission measures, econometric methods, and sample periods, and it is not explained by other firm characteristics. This evidence suggests that higher interest rates may not skew investment away from a sustainable transition.

Suggested Citation

  • Bauer, Michael & Offner, Eric & Rudebusch, Glenn, 2024. "Green Stocks and Monetary Policy Shocks: Evidence from Europe," CEPR Discussion Papers 19754, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:19754
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    1. is not listed on IDEAS
    2. repec:osf:osfxxx:kqdar_v2 is not listed on IDEAS
    3. Karen Davtyan & Adel R. Kalozdi, 2025. "The Power of Words: Central Bank Green Communication and Performance of Energy Sectors," Working Papers wpdea2515, Department of Applied Economics at Universitat Autonoma of Barcelona.
    4. Emanuele Campiglio & Jérôme Deyris & Davide Romelli & Ginevra Scalisi, 2025. "Warning words in a warming world: central bank communication and climate change," Working Papers hal-04978072, HAL.
    5. Boungou, Whelsy & Dufau, Bastien, 2026. "Empirical evidence of a green investment channel of monetary policy under the EU ETS," Economics Letters, Elsevier, vol. 260(C).
    6. Campiglio, Emanuele & Deyris, Jérôme & Romelli, Davide & Scalisi, Ginevra, 2025. "Warning words in a warming world: Central bank communication and climate change," European Economic Review, Elsevier, vol. 178(C).

    More about this item

    Keywords

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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