The role of green innovation in bridging financial development and sustainable economic practices in South Asian countries.

Abstract

Objective: This study examines the impact of green innovation on the connection between financial development and sustainable development in South Asia. It closes a gap in the corpus of previous research by investigating whether green innovation increases financial development's contribution to sustainable development.

Design/methodology/approach: Dynamic panel data for South Asian countries from 2001 to 2023 is used in the study. The Generalized Method of Moments (GMM) is used to evaluate the relationship between the study variables and handle any endogeneity. The analysis is done using E-Views. The study's theoretical underpinnings are endogenous growth theory, natural resource-based theory, and institutional theory. Foreign direct investment and commerce are two more explanatory factors.

Findings: The findings demonstrate the importance of financial development in promoting long-term economic growth and the usefulness of green innovation in strengthening this relationship. The results demonstrate how stable financial institutions and supporting financial policies enhance long-term economic growth. Green innovation and a strong banking sector could assist stabilize the South Asian region's economy and improve living conditions.

Practical Implications: The results will be useful to policymakers and stakeholders in the financial sector who want to design evidence-based that policies simultaneously promote green innovation, sustainable development, and financial development. Supporting financial institutions and implementing sustainability-focused financial rules can help achieve longterm economic and environmental goals. 

Originality/value: By combining dynamic panel data and the GMM estimate approach to assess the moderating impact of green innovation on the financial development–sustainable development nexus in South Asia, the study advances the subject. It offers a regional viewpoint that can help practitioners and politicians create finance systems that support sustainable development goals. 

Keywords: Financial Literacy, Financial Knowledge, Financial Attitude, Financial Inclusion, Financial Behavior, Financial Capability, Mediation, PLS-SEM, Pakistan