Transforming sustainable green growth: Transitional role of dual-sector financial development, integrated global innovation and digital economy strategies

Abstract

This study investigates transitional dual-sector financial development (DSFD), including financial markets and institutions on sustainable green growth (SGG). Meanwhile, integrated global innovation (IGI) and its strategic components are moderate variables, along with the effect of digital economy policy. The sample consists of 64 Green Silk Road Corridor countries with balanced panel data from 2007 to 2022. We employed panel cointegration, two-step system (GMM), and 2SLS methods. OriginPro was used to show graphical trends of the variables and to generate heatmaps for the country- and income-wise analyses. This study confirmed the significantly positive dynamic nature of SGG. The findings showed that the transition of DSFD significantly enhances SGG by increasing the level of green growth and facilitating the shift from a high-intensity carbon economy to a low-carbon sustainable economy. The moderating channels of IGI and interaction terms enhance a country's global SGG path and contribute to achieving the SDGs. However, the sub-indices and interaction terms on the SGG impact appear mixed. The China Silk Road digital economy policy shock contributes positively to, and boosts, the linkage between DSFD and SGG. Hence, the Silk Road innovative digital initiatives policy shock also contributes substantially to partner countries' SGG paths. Furthermore, macroeconomic conditions, regulatory governance resilience, and energy intensity contribute positively to SGG, except for the productivity rent of natural resources. The study was limited to 64 GBRI countries that participated in the 2016 green initiatives. The theoretical contribution affirms that Green Silk Road partner countries are on a sustainable trajectory, supported by positive, genuine savings proposed by economic and endogenous green growth theories. The study suggests that nations should reinvest their financial, natural, and human capital resources into reproducible forms of capital, aligning with the “Hartwick rule” principles and facilitating the transition towards a stronger, greener path. This study emphasizes the potential of innovative technology-enabled financial systems and resilient global interconnectedness to accelerate the transition toward green development and foster integrated societies that support sustainable green growth without compromising future needs. Dual-sector financial development, regional innovation and the digital economy primarily contribute to raising and upgrading people's living standards, integrating sustainable green growth, and alleviating poverty through societal education from environmentally friendly projects. It is concluded that the underprivileged population remains large. Therefore, in the coming year, better integrated global innovation, effective implementation mechanisms and digital economy policies supporting dual-sector financial development, comprising financial markets and financial institutions, are required to boost sustainable green growth. The study is innovative and makes valuable contributions to this emerging concept in this field, particularly within the context of Green Silk Road Corridor countries. First, this study is pioneering and innovative in addressing the critical problem of how to model sustainable green growth based on the triple bottom line, contributing through green savings (adjusted net saving index including particulate emissions), known as the Solow model, to this domain of knowledge based on the Sustainable Development Goals, including the social dimension (SDG 4) of quality education, the economic dimension (SDG 8) of decent work and economic growth and the environmental dimension (SDG13) of climate actions, which is a key objective of the COP29 on climate change. Second, this pioneering study, in the of the Green Silk Road Corridor, explores the untapped potential of the multi-dimensional integrated global innovation index and its of tech-enabling innovation sub-indexes as moderating and interaction terms to contribute to the body of knowledge on the SDGs, especially SDG 8 (based on decent economic growth through financial integration), SGD-9 (ensuring infrastructure, industrialization, and innovation), SDG 16 (helping in strong institutions, peace, justice), and SDG-17 (strengthening the implementation means for the sustainable development). Moreover, it investigates the unified dynamic influence of dual-sector financial development, including financial institution stability and market resilience, on SDG goal 8 and related theoretical and practical knowledge. This study also intends to bridge the research gap by investigating the moderating pre- and post-policy role of the spillover effects of China's Green Silk Road Corridor digital economy policy as a policy shock on sustainable green growth, thereby contributing to the body of knowledge.