Green Finance and Economic Growth: Empirical Evidence from Panel Data Using CCEMG and PCSE Methods

Öz

This article constructs a comprehensive Green Finance Index (GFI) to explore the connection between sustainable finance and economic growth across 43 developed and developing countries, as classified by the International Monetary Fund (IMF), over the period 2013 to 2023. The GFI is developed based on three core dimensions—Finance, Environment, and Economy—using indicators such as green bonds, green loans, green investments, greenhouse gas emissions, forestry, and energy intensity of the economy. A min-max normalization method is employed to ensure comparability across countries and overtime. Using the Common Correlated Effects Mean Group (CCEMG) estimator as the primary methodology and the Panel-Corrected Standard Errors (PCSE) approach as a robustness check; the study investigates both the long-term and short-term dynamics of this relationship. The results reveal a clear contrast between short-run and long-run effects: while trade openness demonstrates a statistically significant and immediate impact on economic growth in the short run, green finance exerts its influence primarily over the long term. This suggests that sustainable financial investments contribute to economic development in a gradual and structural manner, highlighting the importance of long-term policy commitment and integration of green finance mechanisms into national and international economic strategies.

Anahtar Kelimeler

• Green Finance İndex
• Economic Growth
• CCEMG

Destekleyen Kurum

This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.

Etik Beyan

This study was from the doctoral thesis titled “Finance choice with green finance and FinTech integration: Testing the finance hierarch theory” prepared by Asuda Yunusova Ceviz for Niğde Ömer Halis Demir University Institute of Social Sciences under the consultancy of Prof. Dr. Hatice Işın Dizdarlar Erdoğan, and was presented as an oral presentation at the 3rd International Insurance, Banking and Finance Symposium held in Niğde on July 8-10, and its abstract was published in the book of proceedings of the aforementioned symposium. It is declared that scientific and ethical principles have been followed while carrying out and writing this study and that all the sources used have been properly cited.

Teşekkür

I remember with gratitude my very valuable Prof.Dr. Hatice Işın Dizdarlar Erdoğan, who was always with me during this period, supported me with her compassion and love, and who recently passed away. I express my deep gratitude to her.

Yeşil Finans ve Ekonomik Büyüme: CCEMG ve PCSE Yöntemlerini Kullanarak Panel Verilerinden Elde Edilen Ampirik Kanıtlar

Öz

Bu makale, Uluslararası Para Fonu (IMF) tarafından sınıflandırılan 43 gelişmiş ve gelişmekte olan ülkede, 2013-2023 döneminde sürdürülebilir finans ve ekonomik büyüme arasındaki bağlantıyı incelemek için kapsamlı bir Yeşil Finans Endeksi (GFI) oluşturmaktadır. GFI, yeşil tahviller, yeşil krediler, yeşil yatırımlar, sera gazı emisyonları, ormancılık ve ekonominin enerji yoğunluğu gibi göstergeleri kullanarak Finans, Çevre ve Ekonomi olmak üzere üç temel boyuta dayalı olarak geliştirilmiştir. Ülkeler arası ve zaman içinde karşılaştırılabilirliği sağlamak için bir min-maks normalizasyon yöntemi kullanılmıştır. Birincil metodoloji olarak Ortak Korelasyonlu Etkiler Ortalama Grubu (CCEMG) tahmin edicisini ve sağlamlık kontrolü olarak Panel Düzeltmeli Standart Hatalar (PCSE) yaklaşımını kullanarak; çalışma bu ilişkinin hem uzun vadeli hem de kısa vadeli dinamiklerini araştırmaktadır. Sonuçlar, kısa vadeli ve uzun vadeli etkiler arasında net bir karşıtlık olduğunu ortaya koymaktadır: ticaret açıklığı kısa vadede ekonomik büyüme üzerinde istatistiksel olarak anlamlı ve anında bir etki gösterirken, yeşil finans etkisini öncelikle uzun vadede göstermektedir. Bu durum, sürdürülebilir finansal yatırımların ekonomik kalkınmaya kademeli ve yapısal bir şekilde katkıda bulunduğunu, uzun vadeli politika taahhütlerinin ve yeşil finans mekanizmalarının ulusal ve uluslararası ekonomik stratejilere entegre edilmesinin önemini vurgulamaktadır.

Anahtar Kelimeler

• Yeşil finans endeksi
• CCEMG
• Ekonomi büyüme

Destekleyen Kurum

Çalışma, kamusal, özel, ticari nitelikte ya da kâr amacı gütmeyen herhangi bir kurumdan destek alınmadan hazırlanmıştır.

Etik Beyan

Bu çalışma, Niğde Ömer Halis Demir Üniversitesi Sosyal Bilimler Enstitüsü'nde Prof. Dr. Hatice Işın Dizdarlar Erdoğan danışmanlığında Asuda Yunusova Ceviz tarafından hazırlanan “Yeşil finans ve FinTech entegrasyonu ile finans seçimi: Finans hiyerarşi teorisinin test edilmesi” başlıklı doktora tezinden türetilmiş olup, 8-10 Temmuz tarihlerinde Niğde'de düzenlenen 3. Uluslararası Sigortacılık, Bankacılık ve Finans Sempozyumu'nda sözlü bildiri olarak sunulmuş ve söz konusu sempozyumun bildiri kitabında özeti yayımlanmıştır. Bu çalışmanın yürütülmesi ve yazılması sırasında bilimsel ve etik ilkelere uyulduğu, kullanılan tüm kaynakların da doğru bir şekilde alıntılandığı beyan edilmektedir.

Kaynakça

1. Bailey, Delia, and Jonathan N. Katz. "Implementing panel-corrected standard errors in R: The pcse package." Journal of statistical software 42 (2011): 1-11. https://doi.org/10.18637/jss.v042.c01
2. Breusch, T. S., & Pagan, A. R. (1980). The Lagrange multiplier test and its applications to model specification in econometrics. The review of economic studies, 47(1), 239-253. https://doi.org/10.2307/2297111
3. Eboiyehi, O. C., & Ikpesu, F. (2017). An empirical investigation of capital structure and tax shield on business distress in Nigeria: An application of panel corrected standard error (PCSE) approach. Journal of Global Economics, Management and Business Research, 8(2), 67-75.
4. Den Elzen, M., & Höhne, N. (2010). Sharing the reduction effort to limit global warming to 2 C. Climate Policy, 10(3), 247-260. https://doi.org/10.3763/cpol.2009.0678A
5. Dessens, O., Anandarajah, G., & Gambhir, A. (2016). Limiting global warming to 2° C: What do the latest mitigation studies tell us about costs, technologies and other impacts?. Energy Strategy Reviews, 13, 67-76. https://doi.org/10.1016/j.esr.2016.08.004
6. Delbeke, J., Runge-Metzger, A., Slingenberg, Y., & Werksman, J. (2019). The paris agreement. In Towards a climate-neutral Europe (pp. 24-45). Routledge, eBook ISBN9789276082569.
7. Della Croce, R., Kaminker, C., & Stewart, F. (2011). The role of pension funds in financing green growth initiatives. http://dx.doi.org/10.1787/19936397.
8. Dziwok, E., & Jäger, J. (2021). A classification of different approaches to green finance and green monetary policy. Sustainability, 13(21), 11902. 11902; https://doi.org/10.3390/su132111902

9. Galvin, R., & Healy, N. (2020). The Green New Deal in the United States: What it is and how to pay for it. Energy Research & Social Science, 67, 101529. https://doi.org/10.1016/j.erss.2020.101529
10. Glaeser, B. (2002). The environmental impact of economic development: Problems and policies. In The geography of contemporary China (pp. 273-289). Routledge. https://doi.org/10.4324/9780203401415 Iqbal, Sajid, Farhad Taghizadeh-Hesary, Muhammad Mohsin, and Wasim Iqbal. "Assessing the role of the green finance index in environmental pollution reduction." Studies of Applied Economics 39, no. 3 (2021). https://doi.org/10.25115/eea.v39i3.4140
11. Iyer, G. C., Edmonds, J. A., Fawcett, A. A., Hultman, N. E., Alsalam, J., Asrar, G. R., ... & McJeon, H. C. (2015). The contribution of Paris to limit global warming to 2 C. Environmental Research Letters, 10(12), 125002. https://doi.org/10.1088/1748-9326/10/12/125002
12. Harris, J. M. (2019). Ecological economics of the green new deal. Climate Policy Brief no.11. https://sites.tufts.edu/gdae/files/2019/10/ClimatePolicyBrief11_GreenNewDeal.pdf
13. Hou, S., Song, L., Wang, J., & Ali, S. (2021). How land finance affects green economic growth in Chinese cities. Land, 10(8), 819. https://doi.org/10.3390/land10080819
14. Huang, L. (2024). Green bonds and ESG investments: Catalysts for sustainable finance and green economic growth in resource-abundant economies. Resources Policy, 91, 104806. https://doi.org/10.1016/j.resourpol.2024.104806
15. Kao, C. (1999). Spurious regression and residual-based tests for cointegration in panel data. Journal of econometrics, 90(1), 1-44. https://doi.org/10.1016/S0304-4076(98)00023-2
16. Labatt, S., & White, R. R. (2011). Carbon finance: the financial implications of climate change. John Wiley & Sons. https://books.google.com.tr/books?hl=en&lr=&id=qhQBOJlek0EC&oi=fnd&pg=PT7&dq=labatt+and+white+green+finance&ots=B-Ec312NH-&sig=EknqJI03qADgakYMfiwAgGO7M5k&redir_esc=y#v=onepage&q&f=false
17. Lazaro, L. L. B., Grangeia, C. S., Santos, L., & Giatti, L. L. (2023). What is green finance, after all?–Exploring definitions and their implications under the Brazilian biofuel policy (RenovaBio). Journal of Climate Finance, 2, 100009. https://doi.org/10.1016/j.jclimf.2023.100009
18. Meo, M. S., & Abd Karim, M. Z. (2022). The role of green finance in reducing CO2 emissions: An empirical analysis. Borsa Istanbul Review, 22(1), 169-178. https://doi.org/10.1016/j.bir.2021.03.002
19. Ma, M., Zhu, X., Liu, M., & Huang, X. (2023). Combining the role of green finance and environmental sustainability on green economic growth: Evidence from G-20 economies. Renewable Energy, 207, 128-136. https://doi.org/10.1016/j.renene.2023.02.046
20. Mol, A. P. J., & Spaargaren, G. (2007). Ecological modernization theory in debate: A review. Environmental Politics, 9(1), 17–49. https://doi.org/10.1080/09644010008414511
21. Ouyang, H., Guan, C., & Yu, B. (2023). Green finance, natural resources, and economic growth: Theory analysis and empirical research. Resources Policy, 83, 103604. https://doi.org/10.1016/j.resourpol.2023.103604 Pedroni, P. (2001). Fully modified OLS for heterogeneous cointegrated panels. In Nonstationary panels, panel cointegration, and dynamic panels (pp. 93-130). Emerald Group Publishing Limited. https://doi.org/10.1016/S0731-9053(00)15004-2
22. Pesaran, M. H., Schuermann, T., & Weiner, S. M. (2004). Modeling regional interdependencies using a global error-correcting macroeconometric model. Journal of Business & Economic Statistics, 22(2), 129-162. https://doi.org/10.1198/073500104000000019
23. Pesaran, M. H. (2006). Estimation and inference in large heterogeneous panels with a multifactor error structure. Econometrica, 74(4), 967–1012. https://doi.org/10.1111/j.1468-0262.2006.00692.x
24. Pesaran, M. H. (2007). A simple panel unit root test in the presence of cross‐section dependence. Journal of applied econometrics, 22(2), 265-312. https://doi.org/10.1002/jae.951
25. Pesaran, M. H., & Yamagata, T. (2008). Testing slope homogeneity in large panels. Journal of econometrics, 142(1), 50-93. https://doi.org/10.1016/j.jeconom.2007.05.010
26. Pesaran, M. H. (2015). Testing weak cross-sectional dependence in large panels. Econometric reviews, 34(6-10), 1089-1117. https://doi.org/10.1080/07474938.2014.956623
27. Reed, W. R., & Webb, R. (2010). The PCSE estimator is good–just not as good as you think. Journal of Time Series Econometrics, 2(1). https://doi.org/10.2202/1941-1928.1032
28. Romer, P. M. (1990). Endogenous technological change. Journal of Political Economy, 98(5, Part 2), S71–S102. https://doi.org/10.1086/261725
29. Sachs, J. D., Woo, W. T., Yoshino, N., & Taghizadeh-Hesary, F. (2019). Why is green finance important?. http://dx.doi.org/10.2139/ssrn.3327149
30. Tienhaara, K. (2018). Green Keynesianism and the global financial crisis. Routledge. https://doi.org/10.4324/9781315147710
31. Tong, A., Jiang, L., Ru, Y., Hu, Z., Xu, Z., & Wang, Y. (2022). Research on the impact of inclusive finance on agricultural green development: Empirical analysis of China’s main grain producing areas. Plos one, 17(9), e0274453. https://doi.org/10.1371/journal.pone.0274453
32. Van Veelen, B. (2021). Cash cows? Assembling low-carbon agriculture through green finance. Geoforum, 118, 130-139. https://doi.org/10.1016/j.geoforum.2020.12.008
33. Wang, X., Zhao, H., & Bi, K. (2021). The measurement of green finance index and the development forecast of green finance in China. Environmental and Ecological Statistics, 28, 263-285. 10.1007/s10651-021-00483-7 Wen, Shuyang, Why Do We Need Green Finance (December 1, 2021). Journal of Financial Research http://dx.doi.org/10.2139/ssrn.4476089
34. Westerlund, J. (2007). Testing for error correction in panel data. Oxford Bulletin of Economics and statistics, 69(6), 709-748. https://doi.org/10.1111/j.1468-0084.2007.00477.x
35. Xiaofei, Y. (2022). Research on the action mechanism of circular economy development and green finance based on entropy method and big data. Journal of Enterprise Information Management, 35(4/5), 988-1010. https://doi.org/10.1108/JEIM-01-2021-0024
36. Yang, Y., Su, X., & Yao, S. (2021). Nexus between green finance, fintech, and high-quality economic development: Empirical evidence from China. Resources Policy, 74, 102445. https://doi.org/10.1016/j.resourpol.2021.102445
37. Yin, L., & Deng, Y. (2018). Toward uncertainty of weighted networks: An entropy-based model. Physica A: Statistical Mechanics and its Applications, 508, 176-186. https://doi.org/10.1016/j.physa.2018.05.067
38. Yin, X., & Xu, Z. (2022). An empirical analysis of the coupling and coordinative development of China's green finance and economic growth. Resources Policy, 75, 102476. https://doi.org/10.1016/j.resourpol.2021.102476
39. OECD. (2017, 23 May). Investing in climate, investing in growth. OECD Publishing. https://www.oecd.org/en/publications/investing-in-climate-investing-in-growth_9789264273528-en.html available date is 27.05.2025
40. Lindenberg, N. (2014, 04 April). Definition of green finance. file:///C:/Users/pc/Downloads/The_impact_of_green_finance_on_economic_growth__Do.pdf available date is 24.05.2025
41. Spratt and Griffith-Jones (2013, 03 May): Mobilising Investment for Inclusive Green Growth in Low-Income Countries https://www.stephanygj.net/papers/MobilisingInvestmentforInclusiveGreenGrowth2013.pdf available date is 24.05.2025
42. Zadek, S., & Flynn, C. (2014, 17 January). South-originating green finance: Exploring the potential. https://policycommons.net/artifacts/614896/south-originating-green-finance/1595305/ available date is 25.05.2025.
43. UNFCC. (2024, 24 November). COP29 UN Climate Conference Agrees to Triple Finance to Developing Countries, Protecting Lives and Livelihoods https://unfccc.int/news/cop29-un-climate-conference-agrees-to-triple-finance-to-developing-countries-protecting-lives-and available date is 30.05.2025
44. UNFCC (2015, 12 December). Adoptation of the Paris agreement https://unfccc.int/resource/docs/2015/cop21/eng/l09r01.pdf available date is 29.05.2025
45. UNEP FI (2010, 14 January). 2010 Investor Statement on Catalyzing Investment in a Low-Carbon Economy. https://www.unepfi.org/publications/2010-investor-statement-on-catalyzing-investment-in-a-low-carbon-economy/ available date is 28.05.2025
46. UNEP FI (2011, 10 October). 2011 Global Investor Statement on Climate Change https://www.unepfi.org/publications/2011-global-investor-statement-on-climate-change/ available date 28.05.2025
47. Protocol Kyoto (1997, 11 December). https://www.plasseycollege.ac.in/Studymaterial/18138ENVIRONMENTAL-PROTOCOLS.pdf available date is 28.05.2025.