Environmental performance, green finance and green innovation: What's the long-run relationships among variables?

• Published in: Energy economics Vol. 110; p. 106004
• Main Authors: Wang, Quan-Jing, Wang, Hai-Jie, Chang, Chun-Ping
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier B.V 01.06.2022; Elsevier Science Ltd
• Subjects: Cointegration; Cross-section dependence; Developing countries; Energy economics; Environmental movements; Environmental performance; Finance; Green development; Green finance; Green innovation; Innovations; LDCs; Variables; C32; Cross-section dependence; Green finance; Cointegration; C01; Environmental performance; Q40; Green innovation
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/j.eneco.2022.106004

What are the relationships among environmental performance, green finance, and green innovation in developing countries? Existing literatures support the impact of green finance or green innovation on environmental performance, but rare studies query the cointegration among such three variables. We thus utilize the yearly data of 57 developing countries from 2002 to 2016 to empirically examines the relationships among environmental performance, green finance, and green innovation, via panel covariate-augmented Dickey-Fuller unit root test and the Westerlund and Edgerton (2007) cointegration test. Overall, this study confirms the existence of cointegration relationships among these variables. Moreover, the results of pooled mean group estimation suggest that environmental performance can positively affect the green innovation in the long term in the non-emerging countries and countries with better green innovation or environmental performance. Furthermore, green finance positively affects green innovation in the emerging countries and countries with lower level of green finance, while green finance negatively affects green innovation in the countries with better green innovation or environmental performance. Our empirical findings offer important policy implications for the sample of developing countries to promote green innovation and improve environmental performance. •Check long-run relationships among environmental performance, green finance and green innovation.•Investigating the long-run and short-run impacts.•The relationship varies among different countries.