Key Factors Affecting Sustainable Economic Growth in the New Normal Era: An Empirical Analysis of Country Data

Purpose - The global economy has entered a new normal era since the financial crisis of 2007 and 2008. In fact, advanced countries and those emerging have been faced with low growth, low interest rates, low prices, high unemployment, increased government debt, and stricter regulations. Nonetheless, some countries have achieved sustainable economic growth. We attempted to identify factors influencing sustainable economic growth in this era by empirically testing a model with data regarding economic indicators in 25 countries. Design/Methodology - For this empirical test, a panel model was set with nine economic variables for 14 advanced and 11 emerging countries. We conducted both a panel unit root test and a cointegration test in order to measure the stationarity of the data. The results of these tests presented that there have been long-term balanced relationships among the variables. We also conducted another empirical analysis through the fixed effects model and random effects model, and performed a Hausman test to confirm that the fixed effects model was more valid. Findings - Empirical evidence using the fixed effects model showed that the consumption level, capital formation, openness of international trade, urbanization, and innovation ability were significant in promoting the economic development of developed countries, whereas population has a negative impact on the economic development of these countries. In emerging economies, capital formation and education level had a positive effect on sustainable economic growth. Population, openness to international trade, urbanization, and industrial structure had negative impacts on sustainable economic growth. This research contained a certain level of originality in the sense that we analyzed the effects of critical economic indicators on the sustainable economic growth in representative countries that have developed economically in the new normal era. Originality/value - Few studies focus on the influencing factors of sustainable economic development in a specific country. We may provide important implications for economic policy makers that want to grow their economies sustainably. We also may enrich a theoretical and practical basis on economic development.