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Financial stability and sustainable development

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  • Ozili, Peterson K

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.

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  • Ozili, Peterson K, 2023. "Financial stability and sustainable development," MPRA Paper 118793, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:118793
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    References listed on IDEAS

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    Cited by:

    1. Tuwe Soro Garbobiya & Olajide Oladipo & Paul Terhemba Iorember, 2024. "Financial inclusion and monetary policy targets: Evidence from the ECOWAS countries," Modern Finance, Modern Finance Institute, vol. 2(1), pages 84-100.
    2. Ozili, Peterson K, 2023. "Using central bank digital currency to achieve the sustainable development goals," MPRA Paper 118806, University Library of Munich, Germany.
    3. Paul Terhemba Iorember & Nora Yusma Mohamed Yusoff, 2023. "Income–environmental nexus in Africa: The integrating role of renewable energy transition and governance quality," African Development Review, African Development Bank, vol. 35(4), pages 376-389, December.
    4. Hafize Nurgul Durmus Senyapar & Ahmet Aksoz, 2024. "Empowering Sustainability: A Consumer-Centric Analysis Based on Advanced Electricity Consumption Predictions," Sustainability, MDPI, vol. 16(7), pages 1-23, April.
    5. Apanisile Temitope Samuel, 2023. "Exploring the Significance of Financial Stability and the Influence of Expert Financial Advisors on the Financial Well-Being of Nigerian Citizens," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 10(11), pages 01-15, November.

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    More about this item

    Keywords

    Financial stability; sustainable development; financial institutions; institutional quality; capital buffer; sustainable development goals; economic growth; ZSCORE; banks.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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