Does Green Finance Affect Economic Performance? Growth and Crowding-Out Consequences

ABSTRACT

Green finance is crucial to the achievement of China’s dual-carbon goals and its sustainable economic development. Based on the data from 2011 to 2020, This paper employs a double-difference method to examine two effects of green finance on economic growth, namely, its growth and crowding-out effect. The empirical results show that, in general, green finance improves the level of economic growth and doesn’t impede the entry of new enterprises, while crowding out the contribution of heavy polluting industries to the economy. Green financial policies effect economic performance mainly through resource allocation and technological innovation. Specially, in comparison to the central and western regions, green finance exerts a more pronounced influence in the eastern region, potentially attributable to disparities in regional development levels, financial system efficiency, and degrees of marketization. In addition, both growth and crowding-out effect are more significant in resource-dependent cities.

KEYWORDS:

• Green finance
• economic performance
• growth effect
• crowding-out effect

JEL:

• G32
• Q52

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Supplementary material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/1540496X.2024.2345186.

Notes

1. According to the reviewer’s perspectives, we further investigated the impact of two mediating variables on the dependent variable, and the findings exhibited substantial statistical significance. Please refer to the attached Table A9 for the results.

Additional information

Funding

This work was supported by Zhejiang Provincial Philosophy and Social Sciences Planning Project [22NDJC137YB], Zhejiang Federation of Humanities and Social Science [2023N077] and Hangzhou Normal University 2022 postgraduate students “innovation practice and service to local” plan “diligent research and creation” research project [YJS2022009].