Implications of the Relationship Between Quantitative Intervention and Green Bond Issuance for Managing Economic Cycles

This study examines the effect of quantitative intervention (QI) on green bond issuance using a simple linear regression model and evaluates its significance for economic cycle management policies. The findings exhibit a conditionally positive correlation between QI and green bond investment, contingent on the extent of central bank asset expansion aspect, and a negative correlation with monetary base expansion. In a limited sense, this implies that quantitative easing diverts capital away from green bonds, whereas quantitative tightening is associated with increased activity in the sector. This study can help inform policy decisions regarding the appropriate form of monetary intervention, whether QI or more traditional rate-based measures, based on green financing priorities, and it briefly covers measures that may be taken to modify this outcome.