Exploring the Role of Financial Development on Green Growth: An Empirical Analysis of Causal Factors in OECD Economies

Abstract

Green growth promotes new investment opportunities and economic growth and creates a financially sound environment for international organizations and policymakers. One of the important factors is financial development, which supports green growth by providing the necessary funds to invest in environmentally sustainable technologies and practices. This study aims to investigate the effect of financial development and economic, technological, and environmental determinants on the green growth economy. This study covers an annual panel dataset in OECD countries from 1990 to 2020 by utilizing dynamic panel data models. Based on the empirical findings, we conclude that these factors produce a positive impact on green growth. Our findings have important implications for sustainable development since economies transition to more sustainable practices and financial institutions have a critical role to play in supporting and driving this transition. The findings of this study corroborate the growth-led finance theory and encourage policymakers to boost their green growth policy effort.