Does Green Finance Affect Economic Performance? Growth and Crowding-Out Consequences

Abstract

ABSTRACT Green finance is crucial to the achievement of China’s dual-carbon goals and its sustainable economic development. Based on the data from 2011 to 2020, This paper employs a double-difference method to examine two effects of green finance on economic growth, namely, its growth and crowding-out effect. The empirical results show that, in general, green finance improves the level of economic growth and doesn’t impede the entry of new enterprises, while crowding out the contribution of heavy polluting industries to the economy. Green financial policies effect economic performance mainly through resource allocation and technological innovation. Specially, in comparison to the central and western regions, green finance exerts a more pronounced influence in the eastern region, potentially attributable to disparities in regional development levels, financial system efficiency, and degrees of marketization. In addition, both growth and crowding-out effect are more significant in resource-dependent cities.