Uncovering the impact of geopolitical risks on sustainable development in MENA countries: New insights from the LCC framework

Growing geopolitical risks (GPR) and tensions affecting economic performance can significantly influence sustainable development outcomes. However, previous studies do not address whether GPR hinders sustainable development, assessed through a unique sustainable development metric, the load capacity factor (LCF), in Middle East and North Africa (MENA) nations from 1985 to 2021, utilizing various panel data estimation techniques while examining potential cross-section dependence (CD). Empirical results show that (i) a cointegration relationship in the tested model exists. (ii) Economic growth increases (decreases) LCF in the initial (latter) periods of the economic growth. Thus, the load capacity curve (LCC) is invalid in the MENA region. (iii) GPR and energy utilization decrease sustainable development. Empirical results on the impact of trade on sustainable development are positive in baseline estimations. (iv) Robustness checks remarkably reveal that empirical results are robust. As a result, MENA nations face the risk of poor sustainable development outcomes during periods of high GPR. Policy proposals regarding the empirical results are provided in the body of the text. • Impacts of geopolitical risk on ecology is investigated in MENA Countries. • Recently proposed LCC framework is adopted. • LCC is invalid in the MENA Countries. • Geopolitical risk and energy use hamper sustainable development in MENA Countries. • Impact of trade on sustainable development should be carefully dealt with.