The Impact of Economic Disasters on Multidimensional Sustainability: Evidence From Cross‐Country Data

ABSTRACT This paper investigates how economic disasters affect sustainable development worldwide. These disasters, defined as particularly severe economic crises that cause a significant drop in GDP (10% or more), are the main focus of the study. In addition to being massive, economic disasters refer to both economic (financial, debt, and sovereign crises) and noneconomic events such as natural disasters, wars, and epidemics. This allows us to account for various events that potentially affect sustainability and differentiates us from other studies in the field, which typically focus on a much narrower concept—economic crises. In addition, this study looks at various sustainable development indicators and their components, thus enabling a more thorough and all‐encompassing analysis compared to other papers that primarily focus on the environment only. Finally, this paper investigates both the short‐ and long‐term effects across countries at different levels of development, thus providing additional insights into this topic. The findings show that economic disasters harm key sustainability indicators like adjusted net savings and the human development index, with low‐ and lower‐middle‐income countries being hit the hardest. Economic disasters also impact environmental indicators such as CO 2 emissions, deforestation rates, air pollution, energy efficiency, and resource consumption. In addition, the study highlights how these disasters affect progress on specific sustainable development goals, emphasizing the need for policies that focus on long‐term sustainability rather than short‐term economic recovery.