Green credit and PM2.5: a time-varying perspective of China

The causal link between green credit (GC) and particulate matter 2.5 (PM2.5) is discussed this paper for the case of China using the bootstrap rolling-window Granger causality test. The fresh empirical results show that GC had both positive and negative influences on PM2.5 in two separate sub-sample periods. In turn, PM2.5 positively and consistently affected GC in two sub-sample periods. In addition, time periods without causalities were also found in the sample. These inconsistent conclusions do not provide strong support for the hypothesis that GC and PM2.5 would affect each other throughout the whole sampling period. Government intervention, public environmental awareness, the domestic economic situation, and other factors were fully considered in interpreting the deviations in certain periods. Thus, the major contribution of this study is that the linear assumption of causality was relaxed, which is more in line with China’s realities. Some policies are suggested to further strengthen the construction of the GC framework and establish a multiparticipant GC system. Moreover, PM2.5 is an important reference and can be incorporated into enterprises’ green financing strategy.