Is Monetary Policy Transmission Green?

47 Pages Posted: 1 Aug 2023

See all articles by Louis Raffestin

Louis Raffestin

University of Bordeaux

Aurélien Leroy

LAREFI, University of Bordeaux

Inessa Benchora

University of Orléans


This article examines the impact of monetary policy (MP) on firms’ stock prices across CO2 emission levels. We provide a theoretical model in which green firms are less sensitive to MP shocks than brown firms, because they are less exposed to transition risk and provide nonpecuniary utility to investors. We test this prediction by using a panel event-study regression approach on 857 US firms between 2010 and 2019. We find robust evidence that firms with high carbon intensity are significantly more affected by policy rate surprises. The sensitivity premium of brown firms remains significant when controlling for classic sources of MP heterogeneity, is persistent, and increases with climate awareness. Our results suggest that the market neutrality principle guiding the implementation of monetary policy could induce a bias toward brown firms.

Keywords: Climate change, Transition risk, Carbon Emissions, Monetary policy shocks, Risk premia

Suggested Citation

Raffestin, Louis and Leroy, Aurélien and Benchora, Inessa, Is Monetary Policy Transmission Green?. Available at SSRN: or

Louis Raffestin (Contact Author)

University of Bordeaux ( email )

Avenue Léon Duguit
Bordeaux, 33000

Aurélien Leroy

LAREFI, University of Bordeaux ( email )

Avenue Léon Duguit
Pessac, Centre 33400

Inessa Benchora

University of Orléans ( email )


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