Is financial development beneficial to improve the efficiency of green development? Evidence from the “Belt and Road” countries

With the deepening of “the Belt and Road” (B&R) construction, green development has become a consensus. Financial backing is considered essential both in political and economic perspectives to promote sustainable transaction. One preliminary issue worth an investigation is whether financial development is conducive to green development in the “Belt and Road Initiative” (BRI) countries. To answer this question, we construct a model in this thesis to discuss the impact of financial development on the efficiency of green development from three dimensions (financial size,1 financial efficiency, and financial deepening). To synthetically measure the efficiency of green development, this thesis promoted Green-Total Factor Productivity (G-TFP) based on the panel data of 51 BRI countries from 2005 to 2017. Results demonstrate that: (1) The financial development of BRI countries exert a negative effect on the efficiency of green development in the aspects of financial size, financial deepening and financial efficiency in the course of the sample period. (2) This paper further confirms the heterogeneity of the effect of financial development on the efficiency of green development considering the various characteristics (eg. Resource endowment, level of financial development, institutional quality and industrialization stage.) among BRI countries. (3) This paper finds evident that financial development affects the efficiency of green development through different paths. According to the results of the PLFC (partial linear functional-coefficient) model, the influence of financial development on technological progress, changes with income. The empirical results of this article are instructive when the “Belt and Road” countries fully participate in the great vision of “carbon neutrality”.