Trade openness, green finance and natural resources: A literature review

Abstract

Green finance has recently begun to receive increased significance in environmental and business studies due to its importance in combating climate change and the production of excessive greenhouse gases. China is a highly industrial country that is indexed high on the production of pollution. trade openness of this country is also a major contributor to its increased levels of industrialization and pollution. it is believed that if appropriate measures of trade openness are carried out to regulate the flow and trade of natural resources between countries, and by the application of the green finance theories, the level of harmful environmental footprints can be reduced and the and the overall environmental quality and sustainability can be enhanced. Hence, in this paper, u sing a vector autoregression (VAR) model, based on data from 1981 to 2020, this study found that that trade openness and green finance levels are dependent on the use of natural resources significantly. Moreover, it is found that the use of coal and oil has strong negative impacts on green finance implying that the use of coal, oil, and such pollution-causing fuels can lower green finance. Similarly, it was found that gas and oil consumption were strong predictors of trade openness in the country. It is suggested that the use of gas should be increased as it produces the least pollution and can lead trade towards a more sustainable direction.