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Green Finance Dynamics in G7 Economies: Investigating the Contributions of Natural Resources, Trade, Education, and Economic Growth

Author

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  • Chong Xiao

    (Law School, Zhengzhou University, Zhengzhou 450000, China)

  • Riya Tabish

    (National Institute of Environmental Management, Lahore 54792, Pakistan)

Abstract

Despite the growing emphasis on sustainable development, the role of green finance in the context of G7 economies remains largely unexplored. The increasing emphasis on green financial transformation motivates this study to analyze the influence of natural resources (NARSs), population (POPS), education (EDCT), trade (TRD), and economic growth (ECNG) on green finance (GRF) in G7. Using panel data from 1996 to 2021, this study employs the Pooled Mean Group Autoregressive Distributed Lag (PMG-ARDL) methodology to investigate both the long-run and short-run relationships among these variables. To address the issue of possible heterogeneity, this study uses Cross-Sectional Autoregressive Distributed Lag (CS-ARDL). Before applying the PMG-ARDL methodology, this study conducted a series of pretests to ensure data reliability and address potential endogeneity issues. These included tests for cross-sectional dependence, slope homogeneity, variance inflation factor (VIF) analysis, Cross-sectionally Augmented Im-Pesaran-Shin (CIPS) unit root testing, and the Westerlund cointegration test. The PMG-ARDL outcomes show a positive relationship between NARS, ECNG, POPS, TRD, EDCT, and GRF. Specifically, a 1% increase in NARS, ECNG, POPS, TRD, and EDCT leads to a corresponding increase in GRF by 0.050%, 1.98%, 1.81%, 0.62%, and 0.20%, respectively. This study provides valuable policy recommendations for G7 countries, emphasizing the need for targeted strategies to enhance green finance through the sustainable management of natural resources, economic growth, education, and trade.

Suggested Citation

  • Chong Xiao & Riya Tabish, 2025. "Green Finance Dynamics in G7 Economies: Investigating the Contributions of Natural Resources, Trade, Education, and Economic Growth," Sustainability, MDPI, vol. 17(4), pages 1-24, February.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:4:p:1757-:d:1594993
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