Green Finance as a Catalyst of Sustainable Economic Growth: Panel Evidence From South Asia

ABSTRACT This study examines the role of green finance in promoting sustainable economic growth across eight South Asian countries from 2002 to 2022. To capture multidimensional sustainability, a Sustainable Economic Growth Index (SEGI) is constructed, incorporating indicators of economic structure, economic efficiency and environmental quality. The results derived using a Panel Autoregressive Distributed Lag (Panel‐ARDL) framework confirm a stable long‐run relationship between green finance and sustainable economic growth. The model controls for GDP growth, renewable energy consumption, urbanisation, trade openness, political stability and institutional quality which positively influence sustainable economic growth, whereas carbon emissions exert a negative effect. The Dumitrescu–Hurlin causality test reveals bidirectional causality between green finance and sustainable economic growth. The study suggests that expanding green financial flows, strengthening institutions and maintaining political stability can enhance sustainability outcomes in South Asia, while regulated trade openness may support technology transfer and broader long‐term development.