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Finance For Sustainability: Examining the role of Financial Development in Sustainable Development Goals

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  • Alper Aykut Ekinci

Abstract

The role of financial systems in achieving the Sustainable Development Goals and addressing global challenges such as climate change and inequality is increasingly important. However, studies examining this relationship using comprehensive indices and macro-level panel data remain limited. This study aims to examine the relationship between financial development and sustainable development using a large panel dataset covering 132 countries from 2000 to 2021. The analysis employs the International Monetary Fund’s multidimensional Financial Development Index and the United Nations’ Sustainable Development Goals Index, applying the Augmented Mean Group estimator to account for cross-sectional dependence and slope heterogeneity. Empirical results indicate that financial development, economic growth, and renewable energy consumption positively affect sustainable development. In contrast, trade openness and gross capital formation exhibit a negative relationship with sustainability. These findings emphasize the need to strengthen financial systems and promote environmentally friendly investments to achieve the Sustainable Development Goals. Moreover, they provide a crucial warning that, without supporting environmental policies, expanded trade and capital investments may have adverse effects on sustainability, such as the creation of pollution havens.

Suggested Citation

  • Alper Aykut Ekinci, 2026. "Finance For Sustainability: Examining the role of Financial Development in Sustainable Development Goals," Journal of Research in Economics, Politics & Finance, Ersan ERSOY, vol. 11(1), pages 63-76.
    • Handle: RePEc:ahs:journl:v:11:y:2026:i:1:p:63-76
    DOI: 10.30784/epfad.1790481
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    References listed on IDEAS

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    1. Chudik, Alexander & Pesaran, M. Hashem, 2015. "Common correlated effects estimation of heterogeneous dynamic panel data models with weakly exogenous regressors," Journal of Econometrics, Elsevier, vol. 188(2), pages 393-420.
    2. Emara, Noha & El Said, Ayah, 2021. "Financial inclusion and economic growth: The role of governance in selected MENA countries," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 34-54.
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    Keywords

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    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • F18 - International Economics - - Trade - - - Trade and Environment

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