Abstract: It is widely believed that green finance is an important means to promote green growth. However, there is barely any theoretical research or empirical evidence on the relationship between green finance and economic growth quality. Is green finance truly influencing economic growth quality? How? A deep understanding of the relationship between the two is important for both green finance practice and research. Starting from the theoretical context of green finance research, a general equilibrium model with environmental constraints and financial sector is constructed. In the model, the “public goods problem” of natural resources causes the economic growth path to deviate from the optimal level, and green financial institutions can improve the economic growth path byoptimizing capital allocation; as a result, the steady-state resource consumption level is reduced, and economic growth quality is improved. Based on the theoretical model, a provincial panel data from 2005 to 2017 shows that financial support for energy conservation and environmental protection can significantly reduce the resource cost of economic growth; it strongly supports the theoretical inferences. Therefore, it is argued that the core of the development of green finance is to “green” the operating philosophy and investment decisions of financial institutions, which will improve financial resource allocation, and thus promote green growth. In addition, the theoretical model of this article combines the research of green finance with the economic growththeoryand provides a reference for the construction of theoretical models of green finance.

Key words: green finance; economic growth quality; general equilibrium model with resource and environmental constraints; panel data model