Nexus of Financial Development, Innovation for Green Growth in ASEAN Countries

Albeit economic growth of global economies is increasing, nexus of green economic growth, innovation, and financial development needs to be thoroughly understood to make prudent economic policies for sustainability. The research question intends to identify the green growth promoting policies and impact of innovation and financial systems on sustainable economic growth. Rationale for the research is to provide pragmatic evidences to build up economic systems that lead green growth under the emission control and abatement. Empirical approach is used to (i) estimate augmented-Green-Solow model for ASEAN countries (ii) EKC is also estimated with Generalized Method of Moments (GMM) estimation to reveal the impact of financial development, innovation, and trade openness using World Bank data from 1980 to 2014. The empirical results indicate, across estimation methods and specifications, a strong correlation of the innovation, financial development and CO2 emissions per capita for green growth. Further, increase of innovation and financial structure leads the economies to be sustainable with increase of abatement cost with technological adaptation, and human capital. The implications of the study are to deliberate on the determinants of green growth to promote sustainable development in the economies. Finally, the paper guides policymakers to reform financial and innovation systems to achieve advancement in green technologies adapting sustainable economic policies for green growth