Is Economic Volatility Detrimental to Global Sustainability?

This paper examines the effects of economic volatility on global sustainability in a dynamic panel data model allowing for error cross section dependence. It finds that output volatility and financial market volatility exert strong negative impacts on sustainable development, with the impacts exacerbated in some subsamples such as higher en- ergy intensity countries and lower trade share countries. The paper also identifies a financial development channel through which output volatility impedes global sustainability, highlighting the interaction be- tween global financial markets and the wider economy as a key factor influencing the low carbon development path. The finding is signifi- cant for the conduct of macroeconomic and environmental policies in an integrated global green economy.