Central banks making a temporary tilt towards buying green bonds could have only limited effects, a working paper published by the Bank of Italy finds.

In Whatever it takes to save the planet? Central banks and unconventional green policy, Alessandro Ferrari and Valerio Nispi Landi simulate the effects of this “green quantitative easing” policy. They use a modified dynamic general stochastic equilibrium model.

For this policy to be effective, the authors say, there has to be imperfect