Greening Monetary Policy: Evidence from the People's Bank of China

Macaire Camille, and Alain Naef

Working papers from Banque de France

Abstract: In June 2018, the People s Bank of China (PBoC) decided to include green financial bonds into the pool of assets eligible as collateral for its Medium Term Lending Facility. The PBoC also gave green financial bonds a first-among-equals status. We measure the impact of the policy on the yield spread between green and non-green bonds. We show that pre-reform trends are minor, meaning that both green and non-green bonds yields evolved similarily at the time of the reform. Using a difference-in-differences approach, we show that the policy increased the spread by 46 basis points. Our approach differs from the literature in that we match bonds under review with non-green bonds with similar characteristics and issued by the same firm, which improves the relevance of firm fixed-effects. We also specifically investigate the impact on green bonds. The granularity of the data (daily) also allows us to conduct a dynamic analysis by dividing the sample into weekly, monthly and quarterly observations. Our results also show that the impact of the reform starts to materialize after three weeks, has a maximum effect after three months, and has a persistent effect over six months.

Keywords: People s Bank of China; Central Bank Collateral Framework; Green Bonds; Bond Yields; Greenium. (search for similar items in EconPapers)
JEL-codes: E52 E58 G12 G18 Q51 Q54 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2021
New Economics Papers: this item is included in nep-cba, nep-cna, nep-ene, nep-env, nep-isf, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Greening monetary policy: evidence from the People’s Bank of China (2023)
Chapter: Greening monetary policy: Evidence from The People's Bank of China (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:812

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