An efficient financial system is crucial for the attainment of green growth and superior environmental quality. Therefore, our focus in this analysis is to estimate the effect of financial institutions and markets on green growth and environmental quality in highly polluted economies from 1991 to 2019. Estimates of the variables are collected with the help of the ARDL bounds testing approach. Findings of the ARDL model imply that a financial institution's efficiency helps improve green growth in the USA, China, and Japan in the long-run. However, the efficiency of the financial markets causes the green economy to grow in the long run in China and Russia only. On the other side, in the CO2 model, the long-run estimated coefficients of a financial institution's efficiency are negatively significant in Japan and China only, implying that a financial institution's efficiency significantly reduces CO2 emissions. Similarly, the long-run estimates of financial markets are significantly negative in the context of China and Japan only in CO2 emissions.
Keywords: ARDL; Environment; Financial institutions and markets; Green growth.
© 2022. The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.