Journal Article

Is Economic Volatility Detrimental to Global Sustainability?

Yongfu Huang

in The World Bank Economic Review

Volume 26, issue 1, pages 128-146
Published in print February 2012 | ISSN: 0258-6770
Published online October 2011 | e-ISSN: 1564-698X | DOI: http://dx.doi.org/10.1093/wber/lhr042
Is Economic Volatility Detrimental to Global Sustainability?

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  • Prices, Business Fluctuations, and Cycles
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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.

Keywords: E32; O11; O16

Journal Article.  7196 words.  Illustrated.

Subjects: Prices, Business Fluctuations, and Cycles ; Economic Development

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