Interaction between Financial Development and Sustainable Development, Evidence from Developing Countries: A Panel Data Study

Abstract

Sustainable development is a complex concept of the world’s and is an major challenge for all countries. For that reason, some authors have argued the essential role of financial development to stimulate the various pillars of this concept, respectively, the economic pillar, ecological and social. The objective of this paper is to study how the financial system in developing countries contributes to the improvement of sustainable development, focusing particularly on the environmental pillar. Estimations are conducted with a panel data of 20 development countries over the period of 1995-2011 using Econometrics static panel. Our findings show that financial system in developing countries, generally has a favorable impression on Environmental, unfavorable effect for industrial investment and economic growth, but in contrast, in insignificant effect for domestic credit provided by banking sector relative to GDP and Life expectancy at birth, total (years).