Natural Resources, Institutional Quality and Financial Development in GCC Member Countries: Visiting ‘Resource Curse Hypothesis’ by DCCE Estimation

The main purpose of the study is to check whether natural resource rent affects the financial development or supporting the resource curse hypothesis by employing a recently developed estimation technique by Chudik and Pesaran (2015) from 1985 to 2017 in GCC member countries. The novelty of this methodology is to consider structural breaks and the heterogeneity issues that are common in panel data. The results of DCCE estimates are in support of the resource hypothesis that natural resource rent hurt financial development. Additionally, this study takes moderation of institutional quality to check the threshold point or turning point where the natural resource rent effect becomes positive. Our results of interaction term postulate that a higher level of institutional quality mitigates the adverse effect of natural resource rent on financial development. The study results recommend the policy of natural resource rent in the presence of high institutional quality should continue because it improves the financial development in GCC member countries.

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Natural Resources, Institutional Quality and Financial Development in GCC Member Countries: Visiting ‘Resource Curse Hypothesis’ by DCCE Estimation

10.21203/rs.3.rs-356533/v1 ◽

2021 ◽

Author(s):

Muhammad Faheem ◽

Imran Sharif Chaudhry ◽

Sadam Hussain

Keyword(s):

Financial Development ◽

Natural Resource ◽

Structural Breaks ◽

Turning Point ◽

Resource Curse ◽

Institutional Quality ◽

Resource Rent ◽

Study Results ◽

Resource Hypothesis ◽

Natural Resource Rent

Abstract The main purpose of the study is to check whether natural resource rent affects the financial development or supporting resource curse hypothesis by employing a recently developed estimation technique by Chudik and Pesaran (2015) over 1985 to 2017 in GCC member countries. The novelty of this methodology is to consider structural breaks and the heterogeneity issues that are common in panel data. The results of DCCE estimates are in support of resource hypothesis that natural resource rent hurt financial development. Additionally, this study takes moderation of institutional quality to check the threshold point or turning point where natural resource rent effect becomes positive. Our results of interaction term postulate that a higher level of institutional quality mitigates the adverse effect of natural resource rent on financial development. The study results recommend the policy of natural resource rent in the presence of high institutional quality should continue because it improves the financial development in GCC member countries.

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Natural Resource Rent and Finance: The Moderation Role of Institutions

Sustainability ◽

10.3390/su12093897 ◽

2020 ◽

Vol 12 (9) ◽

pp. 3897 ◽

Cited By ~ 2

Author(s):

Muhammad Atif Khan ◽

Muhammad Asif Khan ◽

Kishwar Ali ◽

József Popp ◽

Judit Oláh

Keyword(s):

Financial Development ◽

Natural Resource ◽

Resource Curse ◽

Institutional Quality ◽

Threshold Level ◽

Quality Level ◽

Resource Rent ◽

Natural Resource Rent ◽

The Relationship

This study empirically examines the nexuses between the natural resource rent and financial development in the context of the emerging economy of Pakistan, between 1984 and 2018, by subsuming the important role of institutional quality in this context under symmetric, asymmetric, and threshold settings. The literature to date provides no evidence on the asymmetric relationship between natural resource rent and financial development, and the moderation role of institutional quality in this connection. We show that natural resource rent negatively influences financial development, whereas institutional quality boosts financial development and positively moderates the relationship in the context of Pakistan. Also, we find a single significant threshold value of 3.097 above which the relationship of resource rent-finance turns nonlinear—as up to this threshold the coefficient is 3.228, which declines slightly to 2.804 above the threshold level. This implies that regulators should maintain at least an institutional quality level of up to 3.097 to experience the most desired financial benefits of the natural resource rent in Pakistan. Moreover, the results corroborate the existence of asymmetries in the relationship between the natural resource rent and financial development. This empirical evidence provides fresh insight for stakeholders regarding ambiguous natural resource rents and financial sector development nexuses and recommends that planning organs in Pakistan and other countries in a similar development cadre should use institutional quality as a tool to avoid the resource curse and view natural resources as a blessing rather than a curse.

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Financial Development and Natural Resources Dynamics in Saudi Arabia: Visiting ‘Resource Curse Hypothesis’ by NARDL and Wavelet-Based Quantile-on-Quantile Approach

Review of Economics and Development Studies ◽

10.47067/reads.v7i1.325 ◽

2021 ◽

Vol 7 (1) ◽

pp. 101-117

Author(s):

Imran Sharif Chaudhry ◽

Muhammad Faheem ◽

Fatima Farooq

Keyword(s):

Saudi Arabia ◽

Financial Development ◽

Natural Resource ◽

Estimation Method ◽

Resource Curse ◽

Quantile Estimation ◽

Nonlinear Behaviour ◽

Resource Rent ◽

Natural Resource Rent ◽

The Impact

This study analyses the impact of natural resource rent on financial development to test the resource curse hypothesis in Saudi Arabia on quarterly data span from 1985Q1 to 2017Q4. We employ two novel methodologies at same time such as nonlinear autoregressive model (NARDL) and Wavelet-based quantile-on-quantile estimation to check the asymmetric behaviour of natural resource rent on financial development. The findings of NARDL confirm the nonlinear behaviour of natural resource rent with financial development. The results also show real GDP, gross capital formation and institutional quality affect financial development positively. The empirical results of Wavelet-based quantile-on-quantile estimation method also reveal the heterogeneous response of natural resource rent effect when decomposes into different quantiles that become positive to negative. The results further explain that the natural resource rent has a positive effect in short-run, but it exerts an adverse effect on financial development after attaining stability.

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Natural Resource Rent and Financial Development Nexuses in Bangladesh: The Role of Institutional Quality

Financial Markets Institutions and Risks ◽

10.21272/fmir.4(2).108-114.2020 ◽

2020 ◽

Vol 4 (2) ◽

pp. 108-114

Author(s):

Muhammad Atif Khan ◽

Kishwar Ali

Keyword(s):

Natural Resources ◽

Financial Development ◽

Natural Resource ◽

Institutional Quality ◽

Financial Sector ◽

Resource Rent ◽

Natural Resource Rent ◽

The Relationship

This paper examines the relationship between the development of the financial sector of the economy and natural rents. The financial sector of the economy is currently an important driver of economic growth. The study was conducted through the prism of addressing two key issues: determining the nature of the impact of natural rents on the financial development of Bangladesh; study of the role of the quality of institutional mechanisms in the relationship between natural rent and financial development of Bangladesh. The study period includes 35 years, from 1984 to 2019. The calculations were performed using an autoregressive model with a distributed lag, based on the order of integration and stationary properties of the variables of this study. The article presents the results of an empirical analysis, which showed a significant negative impact of the lease of natural resources on the financial development of Bangladesh. It is empirically confirmed that the quality of institutional mechanisms for the functioning of economic entities has a positive effect on the relationship between natural rents and the financial development of Bangladesh. The results of the study empirically confirm the hypothesis of insufficient natural resources in Bangladesh. The article emphasizes that the positive moderating role of the quality of the institutional base indicates that due to the strengthening of the institutional base, insufficient resources can become a benefit for the financial sector. The results of the study can be useful for representatives of the Government of Bangladesh from the standpoint of improving the quality of institutional infrastructure in order to ensure financial development, in which there will be positive effects from the implementation of natural resource lease processes. In the future, a study is planned to expand potential sources for the proper use of natural resource leases in Bangladesh. Keywords: natural resource rent, financial development, institutional quality, Pakistan.

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NATURAL RESOURCE RENTS AND INTERNAL CONFLICT: THE ROLE OF INSTITUTIONAL QUALITY

The Singapore Economic Review ◽

10.1142/s0217590821500430 ◽

2021 ◽

pp. 1-21

Author(s):

UMAIMA ARIF ◽

MUHAMMAD USMAN ◽

FARZANA NAHEED KHAN

Keyword(s):

Developing Countries ◽

Natural Resource ◽

Institutional Quality ◽

Internal Conflict ◽

Resource Rent ◽

Government Institutions ◽

Resource Rents ◽

Natural Resource Rents ◽

Natural Resource Rent ◽

The Impact

The study explores the impact of natural resource rents on internal conflicts and examines how the aforementioned relationship is influenced by institutional quality. The study is based on a panel dataset of 70 countries for the period 1991–2018. The empirical evidence shows that natural resource rent leads to an increase in internal conflict in both developed and developing countries. However, the impact of natural resource rent on internal conflict is negative in the presence of better quality of government institutions for the global sample, developed and developing countries. Hence, natural resource rent leads to a reduction in internal conflict when it is supported by better institutional quality in terms of high bureaucratic quality, rule of law and low corruption in government institutions. Overall, the study finds that natural resource rent leads to an increase in internal conflict, however, this relationship is mitigated by better institutional quality.

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