Is green growth affected by financial risks? New global evidence from asymmetric and heterogeneous analysis

Abstract

In this paper, we aim to detect whether the instability of financial industry will restrict the global green evolution. To this end, by applying a sample dataset of 47 countries for the period 1996–2018, this study empirically examines the financial risk-green growth nexus, and also checks their regional heterogeneity as well as the impact of the financial crisis. We find that: (i) increased financial risks play an important role in restricting green growth across the globe; by implication, the instability of financial markets is an effective determinant hindering the global green evolution; (ii) significant regional heterogeneity exists in the financial risk-green growth nexus; only in regions with low green growth and high financial risks can financial risks affect green growth negatively; and (iii) the outbreak of the financial crisis in 2008 becomes a watershed in the impact of financial risks on green growth; after the crisis, the effective control of financial risks can facilitate the green economic recovery. Accordingly, some policy implications are put forward concerning the reform of the financial system and the establishment of early warning mechanism.