Economic growth and financial development as determinants of Sustainable Development Goals in D-8 countries
Abstract
This study examines the long-run relationship between economic growth, financial development, and sustainable development performance in the eight D-8 countries—Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan, and Türkiye—over 2000–2024. Sustainable development is measured using the composite SDG Index from the Sustainable Development Report 2025, whose historical series is calculated retroactively using the 2025 indicator set and methodology. The analysis combines second-generation panel diagnostics, including cross-sectional dependence, slope heterogeneity, CIPS/CADF unit-root tests, and Westerlund/Pedroni cointegration tests, with FMOLS and DOLS long-run estimates and AMG/CCEMG as alternative estimators that account for heterogeneous responses and unobserved common factors. Dumitrescu–Hurlin panel Granger tests are used to examine predictive temporal relationships. The estimates indicate that economic growth is generally small and statistically insignificant. Broad money is positive in FMOLS/DOLS but changes sign in AMG/CCEMG, while domestic credit and market capitalization also display estimator sensitivity. Trade openness is negative across the long-run estimators, suggesting that greater integration can generate sustainability costs when trade expansion remains resource-intensive and environmental safeguards are weak. Renewable-energy consumption is also model-sensitive: its coefficient changes sign across estimators, so the evidence does not support a uniformly positive long-run effect. The principal contribution is to provide a D-8-focused, composite-SDG assessment that explicitly recognizes cross-sectional dependence, slope heterogeneity, and estimator sensitivity. The policy implication is therefore not simply to expand finance or trade, but to improve the allocation and environmental quality of financial flows, strengthen green-energy investment, and align trade expansion with environmental standards.