The Economic and Environmental Effects of Green Financial Policy in China: A DSGE Approach

31 Pages Posted: 26 Nov 2019

See all articles by Dongyang Pan

Dongyang Pan

University College London; Central University of Finance and Economics (CUFE)

Date Written: July 20, 2019

Abstract

可以發現,中國版本的這篇文章:http://ssrn.com/abstract=3484817.

This paper explores the potential economic and environmental effects of the newly introduced “green financial policies” in China by an adjusted Dynamic Stochastic General Equilibrium (DSGE) model. This model is based on a basic Real Business Cycle (RBC) framework and introduces three novel aspects: (1) Banking sector offering green lending; (2) Firm sector conducting green and non-green production; (3) Central bank and fiscal sector implementing green financial policy. These new modules allow us to formally introduce green financing activity and policies aiming on it. This study finds that all three green financial policies assessed, namely relending, interest subsidy, and directional reduction for reserve ratio requirement, are effective instruments to incentivise green loan and have positive effects on the green economic transition and the environment. The cost is limited compared with the benefit.

Keywords: Green Financial Policy, Effect, China, DSGE Model

JEL Classification: E10, E58, G28

Suggested Citation

Pan, Dongyang, The Economic and Environmental Effects of Green Financial Policy in China: A DSGE Approach (July 20, 2019). Available at SSRN: https://ssrn.com/abstract=3486211 or http://dx.doi.org/10.2139/ssrn.3486211

Dongyang Pan (Contact Author)

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

Central University of Finance and Economics (CUFE)

39 South College Road
Haidian District
Beijing, Beijing 100081
China

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