Sustainable public green finance under domestic and global policy uncertainties: Does environmental policy stringency matter? Evidence from OECD nations using method of moments quantile-based analysis

Abstract

This study fills the gaps by probing how policy uncertainties and the stringency of environmental policies (EPS), as well as their interactions, affect sustainable public green finance (PGF) in a sample of 19 OECD nations. The analysis employs a method of moments quantile-based analysis using fixed effects from 1996 to 2023. To accomplish these objectives, the present study focused on various policy uncertainties, including economic policy (DEPU) and energy-related uncertainties (DEUI) at the national level, alongside climate policy (GCPU) and world uncertainties (WUI) at the international level. Additionally, we utilized the EPS index and its sub-indices, which encompass market-based, non-market-based, and technology support policies, to assess the impact of environmental strategies thoroughly. Remarkably, the findings underscore that a rise in DEPU and WUI leads to an increase in PGF, while DEUI and GCPU have an adverse effect. Particularly, the findings show that the unfavorable impact of DEUI is more significant at higher levels of PGF, whereas GCPU has a more significant effect at lower levels of PGF. Furthermore, the findings reveal that the EPS index and its sub-indices have positive effects, and stricter environmental policies lead to stimulating PGF. Moreover, the interaction results indicate that the favorable impacts of the DEPU and WUI are intensified with increasing EPS, while the adverse effects of DEUI and GCPU are moderated. The findings are robust and have important implications for policymakers and investors.