Green Lending

Manthos Delis, Maria Iosifidi, Panayotis G. Michaelides and Steven Ongena

No 21128, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a dynamic model of bank credit allocation between green and brown projects under regulatory and monetary distortions. Banks optimally adjust portfolios as regulation reduces the expected returns and success probabilities of brown projects, while monetary policy shapes funding costs. These interacting channels persistently tilt lending incentives, reallocating credit toward greener activities and lowering emissions. The framework identifies which combinations of regulatory pressure and monetary support most effectively accelerate the green transition. Results remain robust with forward-looking banks, adjustment costs, and alternative policy rules. We further analyze how persistent regime shifts in regulation and monetary policy reshape the speed and composition of bank balance-sheet reallocation.

Date: 2026-02
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP21128 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:21128

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP21128

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().