THE IMPACT OF FINANCIAL DEVELOPMENT AND STABILITY ON HUMAN DEVELOPMENT

The role of financial systems in sustainable development has become the center of global and national interest and development strategies, and more developed and stable financial systems are the cornerstones for development finance and for achieving the Sustainable Development Goals. This research aims at examining the impact of financial development and stability on human development in a sample of 185 countries over the period 1990-2019. This study adopts as the primary empirical methodology, the Panel Data Econometrics (Fixed Effects and Random Effects Methods), and for the robustness test, a Dynamic GMM system. To proxy for human development, it exploits the UNDP's Human Development Index and its three sub-indices (Education, Income, and Life expectancy), while it adopts broad money, credit to the domestic private sector, and banking sector deposits (all as a percentage of GDP) to proxy for financial development. Moreover, it represents financial stability by the banking sector Z-score and a dummy variable representing crises. The empirical results reveal the prevailing role of development and stability in the financial systems on human development and its three sub-components, regardless of the country's economic development level.