How Can Financial Development Affect Sustainable Economic Development? Evidence from Asian Countries with Different Income Levels

Achieving economic development through financial markets is one of the most important ideals of any society. The purpose of this study is to investigate the relationship between financial development and sustainable economic development for selected countries in Asia over the period 1993-2021. To this end, the relationships between financial development and economic development indicators for two groups of countries in Asia are measured based on their income levels using the panel ARDL estimation method and the pooled mean group (PMG) estimator method. The results show that for selected low-income and high-income countries, there is a long-term relationship between the variables, and there is a direct significant relationship between the financial depth index, financial inclusion index, economic growth rate, urban growth rate, energy intensity, and sustainable development index (SDI) variables. The better these variables are, the more favorable the sustainable economic development is in these countries, but the relationship between the money supply and the SDI is inverse and significant. As practical policy implications, it is suggested to improve the efficiency of financial markets, strengthen the role of the financial sector in national production, and regulate the relationship between finance and industry.