Sustainable development and economic disasters

Abstract

This paper argues that economic disasters represent a considerable risk for sustainability objectives. To address this issue, two empirical methods are used. First, the relationship between economic disasters and sustainable development is tested by panel regression. Second, the local projection method is used to explore the dynamics, i.e., the behavior of sustainable development indices for ten years after the onset of a typical economic disaster. The results suggest that the relationship between economic disasters and sustainable development is negative, and that the effects of economic disasters are much larger than the effects of “ordinary” economic crises. Moreover, sustainability indices continue to decline even after a typical economic disaster ends. Understanding the complex relationship between economic disasters and sustainability can help policymakers develop strategies to mitigate these adverse effects and ensure the transition to sustainability.