Green through finance: The impact of monetary policy uncertainty on inclusive green growth.

Abstract

For high-quality development, inclusive green growth (IGG) is a crucial strategic option. Given the deceleration in economic growth, monetary policy has several obligations, including stabilizing growth, changing structure, and mitigating risks. However, frequent revisions of monetary policy may diminish its regulatory efficacy due to resulting uncertainty. Accordingly, this study reveals the mechanism of the impact of monetary policy uncertainty (MPU) on IGG. Research suggests that MPU significantly inhibits IGG in the region, as demonstrated by robustness tests. Mechanism test reveal that MPU inhibits IGG by reducing green finance, ecological innovation, media attention, and employment levels. These four transmission mechanisms all show a masking effect. Additionally, further tests show that under different levels of green finance, ecological innovation, media attention, and employment, the impact of MPU on IGG is nonlinear. Heterogeneity analyses also indicate that the inhibition of MPU is weaker in cities with high scientific and technological progress and local fiscal expenditure. Finally, quantile regression demonstrates that the restraining effect of MPU diminishes before rising. This study contributes to the advancement of MPU research, provides a solid foundation for formulating, modifying, and executing monetary policy, and serves as a valuable resource for promoting IGG.