The Effect of Economic Volatility on Sustainable Development: a Case of Europe and Central Asia (1992-2014)

Abstract

The study investigates the effect of economic volatility, measured as standard deviations of GDP per capita annual growth for three-year periods, on sustainable development, measured as ‘genuine savings’ or adjusted net savings including particulate emissions damage. Dynamic panel data analysis is applied for 30 countries of Europe and Central Asia over 1992-2014. The work confirms Huang (2012) result that there is strong negative relationship between economic volatility and sustainable development. However, different empirical methodology and a newer dataset are applied. Therefore, the work presents empirical evidence obtained by employing the first-differenced and system GMM estimators developed by Arellano and Bond (1991) and Arellano and Bover/Blundell and Bond (1998).