Green growth and environmental quality in top polluted economies: the evolving role of financial institutions and markets

Financial development, resource richness, eco-innovation, and sustainable development: Does geopolitical risk matter?

Financial development and geopolitical risks can significantly affect sustainable development. However, the roles of these factors in sustainable development are rarely investigated. Thus, this study takes into account the role of geopolitical risk while exploring the effects of financial development, natural resource rents, and eco-innovation on sustainable development in the Organization for Economic Co-operation and Development (OECD) countries. To this end, yearly data from 1990 to 2019 is analyzed using advanced econometric tests. The Common Correlated Effects Mean Group (CCEMG) results indicate that financial development and eco-innovation are significantly and positively related to sustainable development. Natural resource rents have a detrimental impact on sustainable development which confirms the presence of the resource curse hypothesis in OECD countries. Furthermore, the results revealed that controlling geopolitical risk is useful in fostering sustainable development. Lastly, the panel Granger causality test unveiled one-way causality from financial development, eco-innovation, natural resource rents, and geopolitical risk to sustainable development. Moreover, causalities are found from geopolitical risk to financial development, eco-innovation and natural resources. These findings suggest that OECD countries should prioritize financial development and eco-innovation policies for sustainable development while mitigating the negative effects of natural resource rents. The geopolitical risk can harm sustainable development, so policymakers should promote international cooperation and risk-sharing.

Do green financial and non-financial policies achieve the carbon neutrality target?

Due to the pressing need to combat climate change, reaching carbon neutrality-defined as having net-zero greenhouse gas emissions-has elevated to the status of a worldwide priority. While non-financial policies concentrate on regulation and incentives to promote environmentally friendly behavior, green financial policies strive to move investment toward low-carbon and sustainable initiatives. Therefore, the study aims to examine how green financial and non-financial policies affect carbon neutrality in China from 1995 to 2021. For analyzing the linear and nonlinear estimates, the study has employed the autoregressive distributed lag (ARDL) and nonlinear autoregressive distributed lag (NARDL) frameworks. The findings suggest that in the linear framework, green finance policies and environmental policy stringency encourage renewable energy consumption and discourage CO2 emissions. In the nonlinear framework, the positive shocks in the green finance policies and environmental policy stringency increase renewable energy consumption, and the negative shock in both types of policies discourages renewable energy consumption. In the CO2 model, a positive shock in green finance policies and environmental policy stringency reduces CO2 emissions, and a negative change in both these policies is insignificant. Since the positive and negative changes in both these policies significantly and differently impact renewable energy consumption and CO2 emissions; thus, policymakers should take into account positive and negative changes in both these policies while formulating policies for carbon neutrality targets in China.

The role of monetary and fiscal policies in determining environmental pollution: Revisiting the N-shaped EKC hypothesis for China

The equilibrium between environmental quality and economic growth is one of the contemporary objectives of fiscal and monetary policies in the case of China. In this study, we investigate the extent of the existence of the N-shaped environmental Kuznets curve (EKC) hypothesis and measure the collision of fiscal and monetary policy on carbon emissions within the economic growth perspectives that China is witnessing. This study examines the dynamic nexus between monetary supply, government expenditure, and carbon emissions in China over the spanning from 1980 to 2019. The findings demonstrate that the money supply reduces carbon emissions in the short- and long-run. Precisely, a 1-unit augmentation in monetary policy tool (money supply) will significantly reduce the pressure on the environment by 0.29332 unit in the long-run and 0.79311 unit in the short-run. In contrast, the fiscal policy instrument (government expenditure) contributes to the increase in carbon emissions. Specifically, a 1-unit increase in government expenditure will increase the carbon emission by 0.17835 and 0.48247 units in the long-run and short-run, respectively. Additionally, the result also confirmed the N-shaped EKC hypothesis. Particularly, at the initial stage of economic growth, there are 1.58659 and 4.29197 unit increas in carbon emission in the long-run and short-run, respectively. However, after taking the square of economic growth, this reduces the environmental pollution by 0.3018 and 0.81665 units in the long-run and short-run, respectively. Finally, the cubic form of economic growth shows the 0.01755 and 0.04747 units increase in the pollution level in the long-run and short-run, respectively. Moreover, the study also found the presence of a causality link between government expenditure, economic growth, and carbon emissions. These findings will aid policymakers in implementing fiscal and monetary policies that promote long-term development while lowering carbon emissions.

Has green finance reform promoted green growth in Chinese industry?

Due to their ability to generate green industrial growth, green finance policies are important both in the greening of China's industries and in the promoting of further improvements to its financial system. In this paper, reform pilot zones are used as a quasi-natural experiment with select panel data from 2007 to 2019 taken from 30 provinces in China, and used the DID method to empirically measure the impact of green finance reform on industrial GTFP and its mechanism of action. The findings demonstrate that reforming green finance greatly enhances GTFP of industry during the review period. This result is still valid after carrying out robustness tests. The heterogeneity study finds that the policy plays a large part in fostering GTFP in the middle stage of industrialization but not in the late stage. Further analyses of its transmission mechanism demonstrate that green finance reform mostly fosters industrial green growth through an innovation effect and a structural effect.