DefinePK

Abstract

This study investigates the dynamic relationship between Green Financial Development (GFD) and Sustainable Economic Growth (SEG) in Pakistan, an emerging economy facing severe environmental and economic challenges. Utilizing annual data from 2000 to 2022 and employing the Autoregressive Distributed Lag (ARDL) bounds testing approach, the research examines the short and long term effects of Green Credit, Green Insurance, Green Securities, Green Investment, and Foreign Direct Investment (FDI) on Sustainable Economic Growth. The study also incorporates Urban Population and Technology as control variables. Results of this study reveals that Green Credit And Green Securities significantly promote Sustainable Growth, while Green Investment And Technology show adverse effects. Also Green Insurance contributes positively in the short term but not in the long run. Granger causality analysis confirms a unidirectional causal relationship from Green Credit to Sustainable Growth. These findings underscore the pivotal role of Green Finance in shaping Pakistan’s sustainable development trajectory and provide evidence-based recommendations for policymakers to optimize green financial instruments and enhance institutional frameworks. The study contributes to the growing literature on sustainable finance by offering insights from a developing country scenario.