Development Finance Adaptive Capacity under Polycrisis: Toward a Middle-Range Theory of Economic Transformation Resilience
DOI:
https://doi.org/10.66203/econovia.01204Keywords:
development finance, adaptive capacity, polycrisis, economic transformation resilience, institutional resilienceAbstract
The increasing convergence of interconnected global crises has fundamentally reshaped the context in which development finance operates, exposing the limitations of conventional theories that primarily explain the relationship between finance and economic growth under relatively stable conditions. Although recent scholarship has expanded discussions on resilience, climate finance, digital finance, and transformational adaptation, these perspectives remain fragmented and provide limited explanation of how development finance systems sustain long-term economic transformation under persistent polycrisis. This conceptual paper addresses this theoretical gap by developing a middle-range theory of Development Finance Adaptive Capacity (DFAC). Drawing on an integrative synthesis of the finance–growth, development finance, adaptive capacity, resilience, and polycrisis literature, the study proposes a conceptual framework that explains the adaptive mechanisms through which development finance supports economic transformation resilience. The framework conceptualizes DFAC as a higher-order construct comprising four interrelated dimensions: resource mobilization, institutional coordination, financial reconfiguration, and transformational learning. By repositioning development finance as an adaptive institutional capability rather than merely a financing mechanism, the proposed theory extends existing development finance literature and provides a foundation for future construct operationalization, empirical validation, and policy innovation aimed at strengthening resilient and sustainable economic transformation under conditions of persistent systemic uncertainty.
References
References
Allen, F., Demirguc-Kunt, A., Klapper, L., & Martinez Peria, M. S. (2016). The foundations of financial inclusion: Understanding ownership and use of formal accounts. Journal of Financial Intermediation, 27, 1–30. https://doi.org/10.1016/j.jfi.2015.12.003
Allen, F., & Gale, D. (2000). Financial Contagion. Journal of Political Economy, 108(1), 1–33. https://doi.org/10.1086/262109
Beck, T., Demirgüç-Kunt, A., & Levine, R. (2007). Finance, inequality and the poor. Journal of Economic Growth, 12(1), 27–49. https://doi.org/10.1007/s10887-007-9010-6
Beck, T., Demirgüç-Kunt, A., & Maksimovic, V. (2005). Financial and Legal Constraints to Growth: Does Firm Size Matter? The Journal of Finance, 60(1), 137–177. https://doi.org/10.1111/j.1540-6261.2005.00727.x
Beck, T., Levine, R., & Loayza, N. (2000). Finance and the sources of growth. Journal of Financial Economics, 58(1–2), 261–300. https://doi.org/10.1016/S0304-405X(00)00072-6
Cerutti, E., Claessens, S., & Laeven, L. (2017). The use and effectiveness of macroprudential policies: New evidence. Journal of Financial Stability, 28, 203–224. https://doi.org/10.1016/j.jfs.2015.10.004
Christelis, D., Georgarakos, D., & Jappelli, T. (2015). Wealth shocks, unemployment shocks and consumption in the wake of the Great Recession. Journal of Monetary Economics, 72, 21–41. https://doi.org/10.1016/j.jmoneco.2015.01.003
Demirgüç-Kunt, A., Pedraza, A., & Ruiz-Ortega, C. (2021). Banking sector performance during the COVID-19 crisis. Journal of Banking & Finance, 133, 106305. https://doi.org/10.1016/j.jbankfin.2021.106305
Dikau, S., & Volz, U. (2021). Central bank mandates, sustainability objectives and the promotion of green finance. Ecological Economics, 184, 107022. https://doi.org/10.1016/j.ecolecon.2021.107022
Ding, W., Levine, R., Lin, C., & Xie, W. (2021). Corporate immunity to the COVID-19 pandemic. Journal of Financial Economics, 141(2), 802–830. https://doi.org/10.1016/j.jfineco.2021.03.005
Fahlenbrach, R., Rageth, K., & Stulz, R. M. (2021). How Valuable Is Financial Flexibility when Revenue Stops? Evidence from the COVID-19 Crisis. The Review of Financial Studies, 34(11), 5474–5521. https://doi.org/10.1093/rfs/hhaa134
Flammer, C. (2021). Corporate green bonds. Journal of Financial Economics, 142(2), 499–516. https://doi.org/10.1016/j.jfineco.2021.01.010
Giglio, S., Kelly, B., & Stroebel, J. (2021). Climate Finance. Annual Review of Financial Economics, 13(1), 15–36. https://doi.org/10.1146/annurev-financial-102620-103311
Haldane, A. G., & May, R. M. (2011). Systemic risk in banking ecosystems. Nature, 469(7330), 351–355. https://doi.org/10.1038/nature09659
Hou, S., Zhang, Y., & Song, L. (2023). Digital finance and regional economic resilience: Evidence from 283 cities in China. Heliyon, 9(10), e21086. https://doi.org/10.1016/j.heliyon.2023.e21086
Hu, X., Li, L., & Dong, K. (2022). What matters for regional economic resilience amid COVID-19? Evidence from cities in Northeast China. Cities, 120, 103440. https://doi.org/10.1016/j.cities.2021.103440
King, R. G., & Levine, R. (1993). Finance and Growth: Schumpeter Might Be Right. The Quarterly Journal of Economics, 108(3), 717–737. https://doi.org/10.2307/2118406
Kuhl, L., & Shinn, J. (2022). Transformational adaptation and country ownership: competing priorities in international adaptation finance. Climate Policy, 22(9–10), 1290–1305. https://doi.org/10.1080/14693062.2022.2104791
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. W. (1997). Legal Determinants of External Finance. The Journal of Finance, 52(3), 1131–1150. https://doi.org/10.1111/j.1540-6261.1997.tb02727.x
La Porta, R., Lopez‐de‐Silanes, F., Shleifer, A., & Vishny, R. W. (1998). Law and Finance. Journal of Political Economy, 106(6), 1113–1155. https://doi.org/10.1086/250042
Lawrence, M., Homer-Dixon, T., Janzwood, S., Rockström, J., Renn, O., & Donges, J. F. (2024). Global polycrisis: the causal mechanisms of crisis entanglement. Global Sustainability, 7, e6. https://doi.org/10.1017/sus.2024.1
Levine, R. (1997). Financial development and economic growth: Views and agenda. Journal of Economic Literature, 2(35), 688–726.
Levine, R., Loayza, N., & Beck, T. (2000). Financial intermediation and growth: Causality and causes. Journal of Monetary Economics, 46(1), 31–77. https://doi.org/10.1016/S0304-3932(00)00017-9
Pástor, Ľ., Stambaugh, R. F., & Taylor, L. A. (2021). Sustainable investing in equilibrium. Journal of Financial Economics, 142(2), 550–571. https://doi.org/10.1016/j.jfineco.2020.12.011
Shen, J., Yu, J., & Khoso, W. M. (2024). Green finance as a driver for environmental and economic resilience post-COVID-19: A focus on China’s strategy. Heliyon, 10(15), e35519. https://doi.org/10.1016/j.heliyon.2024.e35519
Siirilä, J., & Salonen, A. O. (2024). Towards a sustainable future in the age of polycrisis. Frontiers in Sustainability, 5. https://doi.org/10.3389/frsus.2024.1436740
Søgaard Jørgensen, P., Jansen, R. E. V., Avila Ortega, D. I., Wang-Erlandsson, L., Donges, J. F., Österblom, H., Olsson, P., Nyström, M., Lade, S. J., Hahn, T., Folke, C., Peterson, G. D., & Crépin, A.-S. (2024). Evolution of the polycrisis: Anthropocene traps that challenge global sustainability. Philosophical Transactions of the Royal Society B: Biological Sciences, 379(1893). https://doi.org/10.1098/rstb.2022.0261
Tunçalp, D. (2026). Entrepreneurial resilience in polycrisis: Adaptation via improvizational action, institutional workarounds, and strategic reconfiguration. Journal of Management & Organization, 32(3), 758–780. https://doi.org/10.1017/jmo.2025.10040
Wei, N. (2024). Green finance, market integration, and regional economic resilience. Finance Research Letters, 67, 105777. https://doi.org/10.1016/j.frl.2024.105777
Xia, Y., Qiao, Z., & Xie, G. (2022). Corporate resilience to the COVID-19 pandemic: The role of digital finance. Pacific-Basin Finance Journal, 74, 101791. https://doi.org/10.1016/j.pacfin.2022.101791
Zeng, W. (2025). Climate finance and new multilateral development banks: approaching co-productive dynamics? Climate Policy, 25(8), 1117–1130. https://doi.org/10.1080/14693062.2024.2442004
Zhang, J. (2025). Digital economy, green finance, and economic resilience. PLOS ONE, 20(2), e0314028. https://doi.org/10.1371/journal.pone.0314028
Downloads
Published
Issue
Section
Categories
License
Copyright (c) 2026 Euis Bandawati, Zulkarnaen (Author)
This work is licensed under a Creative Commons Attribution 4.0 International License.
This journal applies the Creative Commons Attribution 4.0 International License (CC BY 4.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are properly credited.
