Monetary policy and corporate financialization drive sustainable technology

Lu Liu and Chuanjiang Wang

International Review of Economics & Finance, 2025, vol. 101, issue C

Abstract: This study investigates the impact of financialization on the relationship between monetary policy and green technology innovation (GTI), utilizing data from non-financial listed companies in China from 2007 to 2022. The findings reveal that loose monetary policy alleviates financing constraints, promoting GTI compared to tight monetary policy. However, excessive financialization may lead firms to prioritize short-term market returns, undermining their investment in green innovations. The analysis demonstrates that monetary policy positively influences GTI across both state-owned and non-state-owned enterprises, indicating that increased liquidity and reduced borrowing costs facilitate innovation. Additionally, despite regional disparities in economic development, all regions exhibit positive responses to monetary policy regarding GTI. High-tech enterprises, characterized by greater R&D needs, particularly benefit from loose monetary conditions, enhancing their capacity for innovation. The paper underscores the necessity for central banks to adopt transparent and targeted monetary policies to foster sustainable development, while also highlighting the importance of balancing short-term and long-term investment strategies for enterprises. The findings contribute to a deeper understanding of the dynamics between financialization, monetary policy, and GTI, providing implications for policymakers and corporate managers.

Keywords: Financialization; Monetary policy; Green technology innovation (GTI); Sustainable development (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:101:y:2025:i:c:s1059056025003508

DOI: 10.1016/j.iref.2025.104187

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