Green Fiscal Policy and Sustainable Development in ASEAN Countries: Evidence From a Bayesian Spatial Regression Approach

ABSTRACT This study examines the relationship between green fiscal policy and Sustainable Development in 10 ASEAN countries during 2002–2024, focusing on the moderating role of Institutional Quality and spatial spillovers. It analyzes Green Public Expenditure, Environmental Tax, Green Public Investment, and a PCA‐based Green Fiscal Policy Index using a Bayesian Spatial Durbin Model. The study contributes to the literature by integrating multiple green fiscal instruments, testing the moderating role of Institutional Quality, and identifying cross‐country spillovers within a unified Bayesian spatial framework. The results show that all green fiscal policy measures are positively associated with Sustainable Development, while stronger Institutional Quality reinforces these relationships. Positive direct and indirect effects indicate both domestic and regional benefits. CO 2 emissions and Inflation are negatively associated with Sustainable Development, whereas Technological Capacity, Trade Openness, and Financial Development are positively associated. The findings support stronger institutions, coordinated green fiscal policies, and greater regional cooperation in green investment and sustainable infrastructure.