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

Ruoyu Chen, Jingzhi Zhu and Xingyu Wang

Finance Research Letters, 2025, vol. 78, issue C

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.

Keywords: Monetary policy; Collateral framework; MLF; Green bond (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:78:y:2025:i:c:s1544612325003447

DOI: 10.1016/j.frl.2025.107081

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