GARCH modeling: Economic growth, idiosyncratic risk and SDGs in ASEAN countries

This study examines the relationships among economic growth, idiosyncratic risk, Foreign Direct Investment (FDI), inflation, and Sustainable Development Goals (SDGs) within the Association of Southeast Asian Nations (ASEAN). The research integrates Structural Equation Modeling (SEM) and Generalized Autoregressive Conditional Heteroskedasticity (GARCH) modeling to analyze both structural relationships and volatility dynamics in macroeconomic variables. Economic data from ASEAN member countries were analyzed using SEM with AMOS (Analysis of Moment Structures) to identify direct and indirect relationships among variables, while GARCH modeling using EViews was applied to evaluate time-varying volatility in economic growth. The empirical results indicate a significant positive relationship between idiosyncratic risk and economic growth, suggesting that higher levels of firm- or asset-specific risk may reflect entrepreneurial activity, innovation, and investment in higher-return opportunities that contribute to economic expansion. The analysis also shows that progress toward the Sustainable Development Goals exhibits a relationship with economic performance, although the statistical significance varies across models. Furthermore, the GARCH results confirm the presence of volatility clustering, indicating that past fluctuations in economic growth significantly influence current volatility. These findings highlight the importance of effective risk management and balanced policy strategies that encourage innovation while maintaining economic stability. For ASEAN policymakers, strengthening risk management frameworks, supporting entrepreneurship, and aligning development strategies with sustainability objectives can enhance economic resilience and promote long-term sustainable growth.