The Impact of Financial Innovation on Environmental Quality, Green Technological Innovation and Renewable Energy Production: Evidence from OECD Countries

This study examines the impact of financial innovation on environmental quality in OECD economies and investigates how this effect is transmitted through green technological innovation and renewable energy production. The analysis relies on a panel dataset constructed from annual observations for 18 countries over the period 2009–2021. In the empirical design, cross-sectional dependence and stationarity properties are assessed, and the long-run relationship among the variables is examined using a bootstrap-based cointegration approach. Long-run coefficients are estimated using the panel-corrected standard errors framework, while the direction of relationships is tested through heterogeneous panel causality analysis. The findings indicate that increases in financial innovation significantly improve environmental quality by reducing carbon dioxide emissions. Moreover, financial innovation promotes green technological innovation activities and expands renewable energy production, and these two channels reinforce the emissions-reducing effect. Causality results further suggest that financial innovation plays a leading role with respect to emissions and renewable energy, while exhibiting a bidirectional interaction with green technological innovation. Overall, the results imply that sustainable finance policies should be designed in close coordination with technology and energy transition objectives.