Financial stability and sustainable development

Peterson Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: Financial institutions operating in a stable financial system seem to be willing to support the realization of the sustainable development goals (SDGs). This view assumes that financial stability is crucial for sustainable development. We investigate the effect of financial stability on sustainable development. We use a unique financial stability index, sustainable development index and four SDG indicators. We analyse 26 countries from 2011 to 2018 using the system GMM method. The findings of the sustainable development index analysis show that financial stability has a significant effect on the level of sustainable development and the effect is negative in Asian countries. European and Asian countries have a high sustainable development index compared to African countries. The result of the individual SDG analyses show that financial stability has a significant effect on SDG3. Financial stability has a negative effect on SDG10 in Asian countries and a negative effect on SDG3 during periods of economic prosperity. Financial stability has a positive effect on SDG3 and SDG7 in countries where the banking system have high capital buffer. The results show that the effect of financial stability on sustainable development depends on how sustainable development is measured.

Keywords: Financial stability; sustainable development; financial institutions; institutional quality; capital buffer; sustainable development goals; economic growth; ZSCORE; banks. (search for similar items in EconPapers)
JEL-codes: G21 Q01 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-ban, nep-env and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Journal Article: Financial stability and sustainable development (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:118793

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