Analysis of the impacts of financial development on green growth: How does institutional quality matter?

Abstract

This study examines the impact of financial development on green growth in ASEAN-6 countries, offering empirical insights relevant to ongoing efforts toward sustainable economic development. A key contribution of the study is its focus on the moderating role of institutional quality in this relationship, which remains underexplored in the existing literature. Using both Generalized Method of Moments (GMM) and Bayesian regression, the study ensures robustness in its findings. The results show that financial development positively influences green growth, regardless of the measurement approach used. More importantly, institutional quality significantly amplifies this effect. Notably, the moderating role of institutional quality is stronger for financial markets than for financial institutions, marking a novel finding of this study. Therefore, the research not only contributes to the current literature by clarifying the moderating role of institutional quality but also distinguishes between the impacts of financial market development and financial institution development on green growth.