Research on the Impact of Financial Development and Human Capital on the Sustainable Development Goals in Central and Eastern European Countries (CEECs): Evidence from Econometric Approaches

In this paper, cointegration and causality relationship among human development (HDI), financial development (FDI) and sustainable development (ESG) for five CEECs are investigated. In the study covering the period 1990–2022, Hatemi-J (2008) test was used to investigate cointegration relationships. The results revealed the existence of a long-term relationship between FDI-ESG and HDI-ESG variables in four countries except the Czech Republic. In the causality analysis, Enders and Jones’s (2016) Fourier Granger causality and Gormus et al. (2018) Fourier Toda and Yamamoto tests were first applied. The findings provide strong evidence that human capital has an effect on sustainable development. On the other hand, findings that financial development has an effect on sustainable development were seen only in Romania. However, strong evidence has been obtained in Romania, Hungary and Bulgaria that sustainable development has an impact on financial development. In the last stage, Hatemi-J (2012, 2014) asymmetric causality test, which takes into account the effects of positive and negative cumulative shocks in the causal relationships, was used. In all countries except Poland, causality from positive shocks in HDI to ESG was found. The relationships between FDI and ESG are more limited and complex. This study contributes to the literature by investigating the symmetric and asymmetric relationships between ESG-FDI and ESG-HDI within the scope of CEEC and provides original policy implications based on the findings obtained at the country level.