The impact of green finance on economic growth: Evidence from the green finance reform and innovation pilot zone

Abstract

AbstractThis study examines the impact and its mechanisms of green finance on economic growth by using the green finance reform and innovation pilot zone (GFRIPZ) as a quasi‐natural experiment. Based on the panel data of 30 provinces in China from 2011 to 2019, we employ a difference‐in‐differences (DID) model and find that the GFRIPZ's construction has a positive effect on economic growth, resulting in real GDP growth of 2.2% in the pilot zones. Mechanism analysis shows that the GFRIPZ policy promotes economic growth by stimulating green technological innovation and increasing green fiscal expenditures. Further, the moderating effect result reveals that the more powerful the environmental regulation, the better the economic growth effect of the GFRIPZ policy. Additionally, heterogeneity analysis indicates that the GFRIPZ policy can contribute more in accelerating economic growth in Zhejiang, Jiangxi and Xinjiang. Our findings provide the latest empirical evidence that green finance promotes economic growth, as well as cross‐references for policymakers to scientifically execute green monetary policies and effectively balance green development and economic growth.