Racing To Sustainable Development Goals: Exploring The Impact Of Geopolitical Risk

Abstract

According to the International Monetary Fund, there is a growing risk of fragmentation as a result of heightened geopolitical competition and violence. The 17 Sustainable Development Goals (SDGs) set forth by the UN must be achieved by the year 2030, and the world is just over halfway there. However, geopolitical conflicts and global crises pose a danger to the SDGs' precarious growth. Thus, this study takes into account the direct effect of geopolitical risk on sustainable development goals which involves 17 sub-indices developed by The United Nations (UN). Simultaneously, our research explores the role of natural resources, financial development, and institutional quality in moderating the impact of geopolitical risk on sustainable development. To this end, yearly data obtained from 41 UN countries covering the period 2000 - 2022 is analyzed using economic tests. The quantile regression results indicate that a rise in geopolitical tensions can significantly and negatively affect progress toward sustainable development goals. This empirical result remains robust when employing various econometrics models and techniques. Furthermore, the heterogeneity analysis reveals that the detrimental effect of geopolitical risk is more profound in high-income and upper-income countries. More remarkably, we also found that an abundance of natural resources, continuous upgradation in the financial sector, and an improvement in institutional quality can counterbalance the adverse effects of geopolitical risk on sustainable development. These insights offer practical implications for policymakers and governments to design proper frameworks and maintain sustainable development levels at a time of geopolitical tensions over the direction of the world economy.