The dynamic role of ecological innovation and sustainable finance in improving green productivity: evidence from China

Abstract

This study investigates the influence of ecological innovations and sustainable financing in promoting the Chinese economy's green total factor productivity (GTFP) from Q1-2004 to Q4-2018. Initially, this study measures GTFP using Data Envelopment Analysis and applies Bootstrap Auto-regressive Distributed Lagged (BARDL) model for dynamic effects. The preliminary results confirm the existence of unit root and a long-term cointegrating relationship among the model variables. The long-run results demonstrate that ecological innovations and sustainable financing have promoted GTFP in China. Moreover, government intervention is imperative to support green productivity growth at the macro level. However, there is a need to control the adverse effect of unemployment in impeding GTFP. Notably, the long-run results reflect the more substantial impact of the stated variables compared to the short run with the convergence towards long-run equilibrium. The policymakers are suggested to prioritise the development of the financial market and technological innovations.