The paper addresses the challenge of achieving green economic recovery and sustainability. It highlights the detrimental effects of industrialization and population growth on natural resources and the environment, noting the shortcomings of previous international and national efforts like the Kyoto Protocol and the Paris Agreement. The COVID-19 pandemic underscored the urgency of a green economic recovery, prompting a reassessment of economic activities with environmental concerns at the forefront. The cultural and creative industries (CCI), a significant economic sector impacting societal well-being, are identified as a potential driver of green growth. The study focuses on 16 European Union countries due to their well-structured economies, significant CCI contributions to GDP, existing EU policies supporting the CCI sector for sustainable development goals, and the relevance of green sustainability in the post-COVID era. The paper aims to contribute to the literature by developing comprehensive green economy and green economy innovation indexes and assessing the role of CCI finance in driving green growth within the EU for the first time.

The literature review is divided into two strands. The first examines studies on green economic recovery, particularly in the post-COVID era, highlighting the importance of addressing natural resource depletion and climate change. Research emphasizes the need for financial support and private investment to achieve green recovery goals, including the positive impact of green bonds. The second strand explores the development of cultural and creative industries, focusing on the influence of financial factors, government policies, innovation, and technological advancements. Studies highlight the crucial role of CCI in economic development, sustainable development, and the potential of digital cultural services in promoting energy savings. However, this paper identifies a gap in the literature concerning the impact of cultural industry finance on green economic growth within the EU.

The study uses panel data from 16 European Union countries (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Latvia, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, and Sweden) covering the period from 2012 to 2021. The dependent variable is the green economy index, calculated using Gunay et al. (2022)'s method. The main explanatory variable is the CCI market size (a proxy for CCI finance due to data limitations), while control variables include green economy innovation index, issued green bonds, trade in cultural commodities, and financial openness. Before estimation, the authors perform heteroscedasticity tests (LM, LR, and Wald tests) and a cross-sectional dependency test. A second-generation panel unit root test (CIPS) determines the order of integration of the series. The Arellano-Bond dynamic GMM estimation is used to estimate the coefficients of the independent variables on the green economy index, addressing potential autocorrelation and overidentifying issues using diagnostic tests. A robustness check using a 2SLS estimator validates the findings.

The Arellano-Bond dynamic GMM estimation reveals a positive and significant relationship between the CCI market size and the green economy index. A 1% increase in CCI market size leads to a 0.058% increase in the green economy index. Green innovation also shows a positive and significant effect (0.48% increase in the green economy index for a 1% increase in the green innovation index). Financial market openness positively impacts the green economy index (0.015% increase for a 1% increase in financial openness). Trade in cultural commodities also has a significant positive effect (0.184% increase for a 1% increase in trade volume). Issued green bonds show a positive and significant coefficient, with a 1% increase resulting in a 0.003% increase in the green economy index. Robustness checks using 2SLS estimation confirm these findings. Diagnostic tests confirm that the empirical panel data model is reliable.

The findings support the hypothesis that CCI finance positively contributes to green economic growth in the EU. The positive relationship between CCI market size and the green economy index suggests that a flourishing CCI sector, particularly one based on knowledge and innovation, can drive sustainable development. The significant impact of green innovation highlights the importance of technological advancements in fostering a green economy. Financial market openness facilitates greater investment in green initiatives. Increased trade in cultural goods fosters knowledge sharing and technological diffusion, supporting green economic growth. The positive effect of green bonds confirms their effectiveness in attracting private capital towards environmentally friendly projects. These findings align with prior research emphasizing the role of culture, innovation, and finance in achieving sustainable development.

This study demonstrates the significant positive contribution of cultural industry finance to green economic growth in the EU. Policy recommendations include developing green financing mechanisms for the CCI sector, utilizing green cryptocurrencies, promoting trade multilateralism in cultural goods, and providing targeted green support for SMEs. The study’s limitations include the use of a proxy variable for CCI finance and the regional focus on the EU. Future research could expand the scope to include more countries, explore alternative measures of CCI finance, and delve deeper into specific policy interventions.

The study's main limitation is the use of CCI market size as a proxy for CCI finance due to incomplete data on direct financial flows. This could potentially bias the results. The regional focus on 16 EU countries restricts the generalizability of the findings to other regions. Future research should aim to gather more comprehensive data on CCI finance and expand the geographical scope of the analysis to enhance generalizability and robustness.