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Green targeted lending operations in the Euro Area

Author

Listed:
  • Le, Anh H.
  • Uddin, Gazi Salah
  • Lucey, Brian

Abstract

In this paper, we construct a Dynamic Stochastic General Equilibrium (DSGE) model to examine the implications of dual rates for green lending. We demonstrate that implementing a distinct interest rate for banks engaged in green lending can effectively mitigate transition risks while channeling more capital towards green production sectors and firms for an immediate cut of emissions and net zero emission economy targets.

Suggested Citation

  • Le, Anh H. & Uddin, Gazi Salah & Lucey, Brian, 2024. "Green targeted lending operations in the Euro Area," Economics Letters, Elsevier, vol. 243(C).
    • Handle: RePEc:eee:ecolet:v:243:y:2024:i:c:s016517652400377x
    DOI: 10.1016/j.econlet.2024.111893
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    References listed on IDEAS

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    1. Francesco Giovanardi & Matthias Kaldorf & Lucas Radke & Florian Wicknig, 2023. "The Preferential Treatment of Green Bonds," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 657-676, December.
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    7. Stefano Carattini & Garth Heutel & Givi Melkadze, 2023. "Climate Policy, Financial Frictions, and Transition Risk," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 778-794, December.
    8. Annicchiarico, Barbara & Di Dio, Fabio, 2015. "Environmental policy and macroeconomic dynamics in a new Keynesian model," Journal of Environmental Economics and Management, Elsevier, vol. 69(C), pages 1-21.
    9. Alessandro Ferrari & Valerio Nispi Landi, 2023. "Toward a Green Economy: The Role of the Central Bank’s Asset Purchases," International Journal of Central Banking, International Journal of Central Banking, vol. 19(5), pages 287-340, December.
    10. Gibson, John & Heutel, Garth, 2023. "Pollution and labor market search externalities over the business cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 151(C).
    11. Nordhaus, William D, 1977. "Economic Growth and Climate: The Carbon Dioxide Problem," American Economic Review, American Economic Association, vol. 67(1), pages 341-346, February.
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    More about this item

    Keywords

    Dual rates; Optimal policy; Transition risk;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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