Green Growth, Financial Development, and Sustainable Competitiveness in MENAAP Economies

Purpose: This paper examines how financial development and green growth jointly shape sustainable competitiveness in 16 Middle East, North Africa, Afghanistan, and Pakistan (MENAAP) economies and poses a research question about whether their interaction produces a complementary effect. Methodology: An annual panel for 2012–2024 is estimated with a Mean Group Autoregressive Distributed Lag (MG-ARDL) framework. The Global Sustainable Competitiveness Index is modeled as a function of financial development, green growth, their interaction, income, and trade openness. Diagnostics address slope heterogeneity, cross-sectional dependence, integration order, and cointegration; outward foreign direct investment is added as a robustness control. Findings: The interaction between financial development and green growth is positive in both specifications, indicating complementarity. However, the negative conditional coefficients on the constituent variables and the short time dimension require cautious interpretation: the results support a joint finance-green mechanism rather than unconditional positive direct effects. Outward foreign direct investment is negatively associated with domestic sustainable competitiveness, but the estimate is interpreted as an association rather than evidence of causal crowding out. Originality: The study contributes an explicit interaction-based test of the finance-green growth nexus using a multidimensional sustainable competitiveness outcome in MENAAP economies. It also reconciles the direct and interaction effects, clarifies the limits of mean-group inference, and develops a quantified, scenario-based geopolitical stress test that remains analytically separate from the 2012–2024 econometric sample.