The role of institutional quality, renewable energy development and trade openness in green finance: Empirical evidence from South Asian countries

Abstract

By considering the significant role economic growth has played in environmental function between 1990 and 2019, this paper examines the relationships between renewable energy development, trade openness, and institutional quality in the development of green finance in South Asian countries. The effectiveness of institutions and trade transparency are factors in green finance. We use a panel data model to ascertain the cointegration among the variables. The study employs the OLS fixed pool method along with a quantile regression to assess the model and reveal that, although growth in renewable energy development and trade openness worsen the ecological environment, institutional quality and the use of renewable energy promotes green finance development. The findings indicate that trade openness and institutional quality have a positive link with green financing. Institutional quality drives the use of renewable energy, whereas gross domestic product (GDP) drives the environmental impact. In light of these findings, policymakers can put in place beneficial policies for renewable energy development as an economic instrument to minimize ecological footprints and enhance green finance development.