The Impacts of Banking System Stability on Sustainable Development: Conditional Mean-Based and Parameter Heterogeneity Approaches

We explored the impacts of banking system stability on sustainable development for the period 2000-2016 as well pre and postglobal financial crisis periods. We employed econometric frameworks of dynamic fixed effects, system GMM and most recent estimator panel quantile regression with fixed effects to provide robust results from the conditional meanbased and parameter heterogeneity approaches. Our results revealed that, conditioning on other sustainable development determinants, banking system stability have significant impacts on sustainable development as well as empirical evidence of parameter heterogeneity response of sustainable development for countries conditionally distributed on low and high sustainable development path for both shortrun and longrun. In addition, we established that, countries distributed on low sustainable development paths gain more from bank stabilization policies compared to countries on middle and higher sustainable development paths. Finally, we established vanishing adverse effects of banking system stability on sustainable development in the postglobal financial crisis period.