Financial deepening, financial innovation, and education as new determinants of green growth in China.

Abstract

To address the issue of global warming, the agreed solution is to reduce GHG emissions. The plausible solution to reduce GHG emissions is to follow a green growth strategy that refers to the complete decoupling of economic growth from its environmental impact through the sustainable utilization of natural resources. Consistent with this view, this study investigates the impact of financial deepening, financial innovation, and education on green growth in China from 1996 to 2020. The empirical analysis of the model is conducted through quantile ARDL. The long-run estimated coefficients of financial institution deepening are positively significant across most quantiles, whereas the estimated coefficients of financial market deepening are positively significant in almost half quantiles. These results imply that the financial deepening of both financial markets and institutions can positively contribute to green growth. However, the estimates of financial innovations are significant and positive in higher quantiles, implying that financial innovation only contributes to the green when the rate of financial innovation is too high. The estimates of education are positively significant at higher quantiles. Our study highlights various policy suggestions that are aimed at instigating sustainable green growth in China.