Towards sustainable development goals (SDGs): Exploring the synergies of government expenditure, financial and economic development

Government expenditure is frequently viewed as a central policy tool for advancing sustainable development, yet its relationship with Sustainable Development Goals (SDGs) may depend on the broader structural and financial conditions in which it operates. This study examines the association between government expenditure and SDG progress, accounting for the conditioning roles of financial development and economic development in a cross-national panel from 2000 to 2024. The analysis employs complementary panel estimators that allow for cross-sectional dependence, slope heterogeneity, and regime-dependent relationships. The results show that government expenditure is positively associated with SDG progress on average, but this association is conditional and nonlinear rather than uniform across countries. Financial development strengthens the association between government expenditure and SDG achievement, while higher levels of economic development also make this association more favorable. The threshold analysis further reveals statistically significant nonlinear dynamics around an estimated aggregate-development threshold of 26.208 in logged terms: in low-development regimes, government expenditure and its interaction with financial development are less favorably associated with SDG progress, whereas in high-development regimes, government expenditure is more favorably associated with SDG progress when financial development is relatively stronger. The findings indicate that countries may need to sequence fiscal expansion with financial-sector deepening and economic development, rather than treating public expenditure as a standalone instrument for sustainability.