Country Risk and Sustainable Development: Mediating Role of Economic Growth

Abstract

Sustainable development is of great significance for present and future generations. This study examines the mediation role of economic growth on sustainable development through country risk. We have employed the structural equation modeling (SEM) technique to examine the direct and indirect effects of exogenous and endogenous variables. We conducted this analysis using a sample of 24 countries that contributed approximately 65% of global greenhouse gas (GHG) emissions from 2000 to 2019. The empirical analysis based on direct effects establishes that country risk reduces economic growth and sustainable development. Interestingly, the empirics of indirect effects reveal that country risk has a positive and significant indirect impact on sustainable development by using economic growth as a mediator. Moreover, the negative direct effect of country risk on sustainable development is greater than the total negative effect due to the positive indirect effect. Finally, policymakers should minimize country risk to promote economic growth, ensuring environmental, social, and economic sustainability for the safety of current and future generations.