FinTech, green finance, and government effectiveness: conditional leapfrogging in inclusive green growth

This study examines the roles of FinTech development and green finance in inclusive green growth and whether government effectiveness mediates these relationships. The study uses fixed effects with Driscoll–Kraay standard errors, cross-sectionally augmented autoregressive distributed lag, augmented mean group, system GMM, quantile regression, and panel threshold models to address cross-sectional dependence, heterogeneity, persistence, endogeneity, and nonlinear effects. The measurements of inclusive green growth include the Inclusive Green Growth Index, which quantifies digital financial innovation, sustainable capital placement, and institutional capability. The results show that both FinTech and green finance have positive and significant effects on inclusive green growth in both static and dynamic specifications. Government effectiveness increases the direct effects of inclusive green growth and enhances the impact of both FinTech and green finance. The quantile and threshold results also indicate that these effects are stronger in countries with higher performance and governance above the thresholds. This study endorses a conditional leapfrogging process propelled by digital and green finance and competent institutions in developing countries.