Green Growth in OIC Countries: Symmetric and Asymmetric Dynamics of Institutions, Finance, and Environmental Technology

Abstract

Green growth seeks to reconcile economic expansion with the preservation of natural resources essential for future development. However, the factors shaping green growth in member countries of the Organization of Islamic Cooperation (OIC) remain insufficiently understood. This study investigates the relationship between institutional quality, financial development, environmental technology, and green growth in Indonesia, Malaysia, Egypt, Uganda, Tunisia, Bangladesh, and Nigeria over the period 2002–2020. Using 133 country-year observations, the analysis employs linear and nonlinear panel autoregressive distributed lag (ARDL and NARDL) models, with the Hausman test results supporting the use of the pooled mean group (PMG) estimator. The findings identify environmental technology as the factor most strongly associated with green growth, exhibiting a positive long-run relationship but a negative short-run effect. The nonlinear estimates further suggest that this long-run relationship is driven primarily by periods of declining environmental innovation. Institutional quality is positively associated with green growth in the long run, while institutional deterioration appears to offset gains of a comparable magnitude. Financial development, by contrast, shows no significant long-run benefit and is negatively associated with green growth in the short run. However, as the equality of coefficients associated with positive and negative changes was not formally tested, the estimated asymmetries should be interpreted as indicative rather than conclusive. These findings highlight the importance of strengthening institutional capacity, aligning financial resources with green investment priorities, and maintaining stable support for environmental innovation.