The Driving Mechanisms and Synergistic Effects of Differentiated Green Financial Policies in Low-Carbon Transition: A DSGE Model Incorporating Multiple Green Financial Instruments
SUN Chuanwang, HE Yiruo
Paula and Gregory Chow Institute for Studies in Economics, Xiamen University/Key Laboratory of Econometrics, Xiamen University, Ministry of Education
Summary:
The effective integration of diverse green finance instruments is central to China's green finance policy implementation, given the ongoing maturation of its multi-faceted green finance system. Understanding the distinct functional roles and mechanisms of these instruments is crucial for unlocking their synergistic potential in facilitating the low-carbon economic transition while mitigating the trade-off between decarbonization and economic growth. This study systematically identifies the core characteristics and operational mechanisms of key green finance instruments, including green credit, green bonds, green funds, and green relending. We innovatively construct a Multiple Green Finance Dynamic Stochastic General Equilibrium (MGF-DSGE) model, incorporating the eight specific green finance policy variables into the optimal decision-making frameworks of enterprises, banks, and government agencies. Based on the model and a detailed classification of corporate attributes, scale and financing channels, we simulate realistic capital flows and transaction patterns between enterprises and financial institutions by internalizing the intensity of different supporting policies, enabling a comprehensive investigation into the synergistic impacts of green finance policy combinations on low-carbon transformation. The main findings are as follows. First, green finance policies exert a significantly positive effect on low-carbon economic transition. By directing capital towards green sectors through scale and funding tilt, these policies optimize the financing environment and capital allocation for clean enterprises. This occurs via lowering green credit and bond interest rates, while simultaneously constraining financing for traditional polluting enterprises. Second, green credit and green bonds primarily stimulate short-term market dynamism, rapidly expanding green financing volumes, but their effects diminish over time. Green funds promote long-term technological progress through fiscal leverage. The synergistic interaction of these four instrument types facilitates a smooth, low-carbon transition by balancing short-term financing needs with long-term structural adjustments. Third, analysis of policy combinations reveals that price-quantity strategies best balance green production levels, financing sustainability, and environmental benefits. Based on these insights, the study proposes three key policy recommendations. (1) Promote the development of an integrated multi-instrument green finance synergy system. Fully leverage the synergistic effects and complementary functions of diverse green financial tools. Utilize structural tools such as green loans and re-lending to anchor the foundation of real-economy transformation through financing adjustments and liquidity support. Rely on market-based tools such as green bonds and funds to guide the greening of resource allocation through capital pricing and leverage. Together, these form an integrated, efficient, and synergistic low-carbon transition pathway. (2) Implement a tiered enterprise classification mechanism for better management. Establish a multi-dimensional evaluation system based on environmental performance, conduct dynamic assessments of corporate energy efficiency levels, economic benefits, and emission status, and form a differentiated grading management framework. Enable differentiated financing incentives for green firms, provide subsidies for technological upgrades and transitional financing arrangements to ease transition financing constraints. (3) Construct an adaptive framework for green finance policy combinations. In the short term, synergies between price-based and quantity-based tools should be prioritized to enlarge green investment scale by lowering costs and enhancing liquidity. In the long term, the integration of fiscal instruments with structural policies should be promoted, use funds to leverage social capital for green investment, supplemented by monetary policies to enable more precise resource allocation, ensuring a gradual and effective transition. The primary contributions of this study lie in three aspects. First, this paper addresses a critical gap in existing research by systematically analyzing the synergistic effects of multiple green finance instruments. While achieving low-carbon development requires coordinated policy mixes, prior studies have predominantly examined single tools in isolation, neglecting the interactive mechanisms that define real-world policy implementation. We develop a new MGF-DSGE model that integrates core features and function mechanisms of four instruments with parameter of intervention intensities of eight incentive policies, which overcomes the compatibility challenges of modeling heterogeneous tools in traditional approaches by embedding cross-sector behavioral equations and transmission pathways. This enables a unified assessment of how interdependent policy levers jointly reshape corporate financing decisions and long-term transition dynamics and provides a new theoretic structure. Second, the study advances the literature by incorporating firm heterogeneity into the dynamic analysis of the asymmetric effectiveness of diversified green finance policies. Grounded in practical contexts, we differentiate firms by environmental performance, size, and financing channels. By modeling asymmetric access to credit instruments, bond markets, and government-led green funds, we capture real-world financing structures more accurately. This approach reveals how policies dynamically generate green premiums and crowding-out effects. Third, we pioneer a quantitative framework to disentangle standalone versus synergistic policy impacts. The MGF-DSGE model decomposes the marginal effects of all eight policy variables on transition outcomes, identifying their distinct temporal roles. By testing policy combinations, we demonstrate that price-quantity hybrid strategies optimally balance green productivity, financial sustainability, and emissions reduction. Beyond green finance, our analytical framework offers a transferable paradigm for evaluating multi-policy synergies in other domains.
孙传旺, 何一若. 低碳转型中差异化绿色金融政策的驱动机制与协同影响——基于引入多元绿色金融工具的DSGE模型[J]. 金融研究, 2025, 539(5): 114-132.
SUN Chuanwang, HE Yiruo. The Driving Mechanisms and Synergistic Effects of Differentiated Green Financial Policies in Low-Carbon Transition: A DSGE Model Incorporating Multiple Green Financial Instruments. Journal of Financial Research, 2025, 539(5): 114-132.
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