Can green finance be helpful in shifting from resource curse to resource blessing in China? Evidence from Markov switching equilibrium model

Abstract

Keeping aside the debate over whether resources are a burden or a blessing, the resource curse theory has been put to the test in the literature using several significant variables. The “resource curse” concept does emphasize the need for green financing, but sadly, this was not taken into account. Recently, due to strong environmental pressure, the need for green financing has been acknowledged. Keeping this in mind, it is crucial to consider how green finance might improve the use of natural resources to stimulate economic growth. Therefore, in this work, we explore the role of green financing, innovation, and economic complexity in the theory of the resource curse. The study used a Markov switching equilibrium correction model with shifts for the data from 2000 to 2019 in a Chinese context. Due to the overuse of natural resources, empirical data support the presence of the resource curse theory in China. The study's findings also support the favorable effects of innovation, the economic complexity index, and green finance on economic performance. In order to turn China's resource curse into a resource blessing, the study directs policymakers, government officials, and scholars toward theoretical and practical implications related to green finance and innovation.