The coevolution effect of central bank digital currency and green bonds on the net-zero economy

Abstract

Directed by the net-zero emission goal, the green bond has become an essential financial tool to promote the development of the green economy. However, the greenwashing risk makes it doubtful whether the green bond can play a positive role. Therefore, this study constructs a six-sector dynamic stochastic general equilibrium (DSGE) model to analyze whether the coevolution of central bank digital currency (CBDC) and green bonds can fully play a positive role in promoting the net-zero economy. The results indicate that: (i) Increased CBDC supply has a positive effect on the economy, and also promotes green bond financing and net-zero emissions. (ii) Compared with non-interest-bearing CBDC, the coevolution of interest-bearing CBDC and green bonds is more likely to promote the net-zero economy and enhance the effectiveness of monetary policy. (iii) When the economy is overheating or in recession, the central bank can regulate green bond financing by adjusting the CBDC interest rate to promote a net-zero economy. (iv) The coevolution of interest-bearing CBDC and green bonds will achieve a higher welfare level than non-interest-bearing CBDC. This study provides guidance for the coevolution of CBDC technology innovation and green bond financial innovation.