Navigating sustainable growth: Decoding the influence of digital economy on economic sustainability

The digital economy can offer transformative pathways to decouple economic growth from environmental degradation, heralding a sustainable future. In this context, can digital economy promote economic sustainability? This study investigates this relationship across European countries from 2003 to 2019 based on the awareness-motivation-capability framework. A new economic sustainability index is developed. By applying system generalized method of moments technique, the findings unveil a significant positive effect of the digital economy on economic sustainability. In terms of moderating impacts, natural resource depletion and research and development positively moderate and strengthen the digital economy’s impact on economic sustainability. Regarding mediating effects, this research identifies circular economy and energy efficiency, categorized as carrying capacity, along with financial development and institutional quality, classified as absorptive capacity, which positively mediate the association between the digital economy and economic sustainability. These findings highlight how the digital economy promotes economic sustainability, guiding policymakers in integrating digital initiatives.