FINANCIAL INNOVATION AND SUSTAINABLE ECONOMIC DEVELOPMENT IN DEVELOPED ECONOMIES: THE INTERPLAY OF FINANCE, TECHNOLOGY, AND RENEWABLE TRANSITIONS

Abstract

In developed economies, financial innovation has transformed from just a tool for efficiency and market growth into a key player in driving sustainable economic development (SED). This paper takes a closer look at how financial innovation, financial development, renewable energy consumption, and information and communication technology (ICT) work together to influence sustainable growth in OECD and G7 countries. By employing a dynamic panel model estimated through the two-step system Generalized Method of Moments (GMM), the study analyzes data from 28 developed nations over the period from 2000 to 2024. The findings reveal that financial innovation and development are crucial indicators of sustainable economic advancement. Additionally, renewable energy consumption and ICT serve as supportive elements, enhancing the sustainability effects of financial innovation by fostering efficiency, optimizing resources, and reducing carbon emissions. Socioeconomic factors like trade openness, foreign direct investment (FDI), and demographic structure also play a significant role in shaping the sustainability paths of nations. The results indicate that achieving SED in developed countries isn't just about technological progress; it's about implementing integrated policies that connect finance, innovation, and environmental governance. The paper wraps up with practical recommendations for policymakers, highlighting the importance of regulatory alignment, green financial ecosystems, and inclusive digital transitions as vital components for long-term sustainability.