Macroeconomic Volatility and Inclusive Sustainable Development in Africa

ABSTRACT Macroeconomic volatility can weaken the inclusiveness and sustainability of development outcomes, yet its implications for Sustainable Development Goal (SDG) performance remain underexplored in Africa. Previous studies focus largely on volatility–growth or volatility–inequality relationships, with limited attention to the joint effects of macroeconomic instability and inequality on sustainable development. This study examines these relationships using an unbalanced panel of 44 African countries from 2000 to 2022. To better capture inclusiveness, an inequality‐adjusted SDG index (ISDG) is constructed alongside the conventional SDG Index (SDGI). Macroeconomic volatility is measured through fluctuations in inflation, output growth, government expenditure, and exchange rates. The analysis employs two‐way fixed‐effects estimation, complemented by interaction models and robustness checks using Driscoll–Kraay, correlated random‐effects, and System GMM estimators. Results show that inflation volatility is consistently associated with lower inclusive sustainable development, while income inequality exerts a strong, persistent negative association and amplifies inflation volatility's adverse effect. These findings remain stable across alternative inequality‐adjustment formulas and the conventional SDGI. Subgroup estimates show that the negative association between inflation volatility and sustainable development is significantly stronger in resource‐dependent economies. The paper concludes with policy implications for fiscal authorities, central banks, and regional institutions combining macroeconomic stabilisation with inequality reduction.