Green finance and tourism-led economic growth

Purpose This study analyzes the effects of tourism (TOR), green finance (GF), carbon emissions (CO2) and foreign direct investment (FDI) on economic growth (EG) in leading tourist economies. Design/methodology/approach This study employs the Residual Augmented Least Squares Engle-Granger (RALS-EG) cointegration approach to test the long-run relationship, followed by the Method of Moments Quantiles Regression (MMQR) to capture heterogeneous effects across different quantiles of EG. Findings The finding of the RALS-EG cointegration confirms the existence of a long-run relationship between TOR, GF, CO2, FDI and EG in leading tourist economies. Furthermore, the MMQR findings reveal that TOR and CO2 exert positive and statistically significant effects on EG across all quantiles, while GF positively influences EG across most quantiles (q2 to q9). Moreover, FDI contributes positively to EG, particularly in the upper quantile (q6 to q9), suggesting that its growth-enhancing benefits are more pronounced in economies with greater economic capacity and investment absorption potential Research limitations/implications This study enhances the existing literature in three significant aspects: First, it integrates TOR, GF, and EG within a unified framework; second, it employs RALS-EG and MMQR methods to capture long-run and heterogeneous effects; and third, it provides evidence on the role of GF in supporting sustainable tourism-led growth. Originality/value The findings suggest that leading tourist economies should allocate resources towards the TOR sector, advance sustainable finance and attract FDI to decouple EG from environmental stressors while strengthening environmental sustainability.