Do green bond markets and digital financial inclusion foster inclusive economic growth? Evidence from emerging economies

Abstract

This article looks at the contribution of green bond financing and digital financial inclusion towards economic growth in the wider context of inclusive and sustainable development. The study uses a dynamic panel System Generalised Method of Moments model to tackle endogeneity and dynamic bias using a panel dataset comprising 35 developed and emerging economies in the timeframe 2010–2024. The purpose of this dual examination of green finance and digital Inclusion is to represent the Industry 5.0 framework, which shows how the combination of sustainable capital allocation and human-centric technological access can create resilient and sustainable economic systems. The main variables include green bond issuance, access to and penetration of fintech, financial inclusion index, carbon intensity, inflation and investment. To test model validity, Hansen J-statistics and the Arellano-Bond test are used. Green bond financing, as well as digital financial inclusion, positively and statistically significantly contribute to economic growth. Furthermore, the long-term growth is found to be stimulated and improved through sustainable and well-designed financial mechanisms much more than through standard credit expansion. First, analysis is based on macroeconomic aggregates and Gross Domestic Product (GDP) growth as a proxy of inclusive growth (which can lack distributional aspects of inequality and poverty). The results emphasise the need to align financial innovation with sustainability objectives and to increase digital financial infrastructure in order to facilitate widespread economic growth. This study enriches the literature by integrating the concepts of green finance and digital financial inclusion into focus using a dynamic panel model, where the effect of financial quality and structure on sustainable economic growth is analysed. The face-to-face conference will feature ten sessions that present comprehensive views on sustainable finance, green bonds, innovation, digital financial inclusion, inclusive growth and investment.