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Is Economic Volatility Detrimental to Global Sustainability?

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  • Yongfu Huang

Abstract

In a dynamic panel data model allowing for error cross-section dependence, output volatility is found to impede sustainable development. Through a financial development channel (liquidity liability ratio), output volatility exerts a significant effect on depletion of natural resources, a key component of sustainability. Low-income countries, low energy-intensity countries, and low trade-share countries tend to be especially vulnerable to macroeconomic volatility and shocks. The findings highlight the interaction between global financial markets and the wider economy as a key factor influencing sustainable development, with important implications for macroeconomic and environmental policies in an integrated global green economy. Copyright 2012, Oxford University Press.

Suggested Citation

  • Yongfu Huang, 2012. "Is Economic Volatility Detrimental to Global Sustainability?," World Bank Economic Review, World Bank Group, vol. 26(1), pages 128-146.
  • Handle: RePEc:oup:wbecrv:v:26:y:2012:i:1:p:128-146
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    File URL: http://hdl.handle.net/10.1093/wber/lhr042
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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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