Re-investigation of the resource curse hypothesis: The role of political institutions and energy prices in BRIC countries (original) (raw)

Exacerbating effect of energy prices on resource curse: Can research and development be a mitigating factor?

Resources Policy, 2020

This study investigates the impact of natural resources in the presence of research and development and energy prices on the improvement of financial development for the Group of Seven (G7) economies for the period of 1990-2017. In doing so, the study employs a cross-sectional dependence test, Westerlund cointegration approach, and Common Correlated Effect Mean Group methods. Moreover, for robustness checks, this study uses cross-sectionally augmented ARDL (CS-ARDL) and augmented mean group (AMG) tests. Unlike previous studies, our study uses a multidimensional approach to financial development, which captures the performance, accessibility, and depth of both financial institutions and markets. The outcomes indicate that natural resource abundance for G-7 countries helps expand financial development. In contrast, rising energy prices adversely affect the expansion of financial development. However, research and development expenditures increase financial development. From the empirical findings, this study suggests the promotion of research and development expenditures, control the increasing energy prices to further benefit from the abundance of natural resources in G-7 economies.

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

Review of Economics and Development Studies, 2021

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 beca...

Causal Relationship between Energy Consumption, Economic Growth, and Financial Development: Evidence from South Asian Countries

Journal of Environmental Science and Economics

Energy is a challenging and emerging problem in the world. Most South Asian countries have limited means but they cannot utilize a major part of their resources due to the high cost of exploration. However, few countries in this region have sufficient capacity and abundant energy resources to overcome the issues related to energy, but due to several reasons, they are not going to play an effective role in this field. As we know South Asian economies have limited resources and facing energy crises due to these reasons, we conduct research on this region as well. The aim of this study is to examine the relationship between economic growth (GDP), financial development (FD), and energy consumption (ENC) for South Asian countries for the period 1991-2020. For the empirical purpose, panel co-integration approaches are applied. However, the Pooled Mean Group (PMG) long-run result shows that the impact of financial development (FD) and economic growth (GDP) on energy consumption (ENC) is po...

An Empirical Analysis of the Impact of Energy Consumption on the Financial Development of the Emerging Economies: A Moderating Role of Oil Prices

International Journal of Economics and Finance, 2016

This research empirically analyzes the relationship between energy consumption and financial development by making use of secondary data for 22 emerging economies over the period of 1999-2012. Moreover, this paper also spotlights the moderating role of oil prices. Furthermore, financial development is measured by utilizing of various proxies relevant to banking sector and stock market as well. Hence, the findings of the research reveals that oil prices negatively moderates the relationship between energy consumption and financial development. Moreover, results highlight that measures used to calculate financial development are also of key concern to explore the relationship between energy consumption and financial development.

Energy-Finance Nexus: Evidence from African Oil Exporting Countries

International Energy Journal, 2021

The focus of this study is to examine the effect of energy consumption, energy intensity, energy prices on the financial development of some selected top oil exporting countries in Africa. The study takes the period from 1976 until 2019 for the analysis. Both the cross-sectional and the homogeneity tests confirmed the presence of cross-sectional dependency and heterogeneity across the panel data set. Likewise, the dynamic and heterogeneous co-integration result reveals the presence of long run relationship among the scrutinized variables. The estimation result further indicates that both the energy intensity and energy use positively relate with the financial development of the sampled economies, while energy price indicates a negative relationship towards financial development. In addition, the causality results by Dumitrescu and Hurlin causality shows a unidirectional causal relationship from energy use to financial development. It also indicates another one-way causal linkage from energy intensity to financial development. Meanwhile, there exists a feedback causal effect between energy price and the financial development for all the sampled economies. In the last section of the paper, the analysis makes available policy recommendations.

Financial Resource Curse in Resource-Rich Countries

IMF Working Papers

Why do commodity-dependent developing countries have typically lower levels of financial development than their peers? The literature has proposed many possible explanations, but it typically does not dwell on the deep mechanisms that drive such an outcome. In this paper, we argue that one of the main causes is the shocks to commodity prices. We test the hypothesis on 68 commodity-rich developing countries over the period 1980-2014, and we find strong evidence of the financial development resource curse through the channel of commodity price shocks, after controlling for other explanations found in the literature. The findings are robust to the different types of commodities, the nature of the shocks, various indicators of financial development, and alternative econometric methods. We also show how the impact of these shocks can be mitigated through good quality of governance.

Modeling The Impact of Political Institutions on Energy Security: Evidence from High-Income Countries

Energy security has always been the most crucial objective for nations seeking sustainable economic growth. The present study examined the impact of political institutions on energy security using panel data from 34 high-income countries for the years 2000-2018. To investigate the mechanisms through which political variables affect energy security, the study took into account the roles of economic growth, trade, financial development, and urbanization. For the empirical estimation of the research's objective, study applies latest econometric techniques, i.e., Panel robust Driscoll-Kraay standard error technique and Dumitrescu and Hurlin causality test. Empirical findings demonstrated the positive effects of trade, economic growth, and financial development on energy security. Particularly, political institutions have a positive impact on energy security in the sampled nations. However, the findings showed urbanization has a negative influence on energy security. Additionally, there is a two-way causal link between trade, financial development, and energy security. The study suggested that more green investment in the energy sector for sustainable development might be a result of strong political institutions. Government of selected economies be proactive for raise the nation's political indicators and put in place systems for financial reporting that are transparent.

Financial development curse in resource-rich countries: The role of commodity price shocks

The Quarterly Review of Economics and Finance, 2019

 Empirical analysis of the effect of commodity price shocks on financial sector development in resource-rich countries.  Commodity price shocks have negative effects on financial sector development  The effect is mitigated in countries with good institutions  The findings are robust to various robustness checks

A Nexus of Energy Consumption, Institutions, FinancialMarket and Economic Growth

2018

This study examined the impact of energy consumption, institutions and financial market on economic growth of Pakistan for the period of 1985-2014. Vector error correction (VECM) model is applied to analyze the short run and long run association among variables. Estimated results reveal that energy consumption, institutional quality, financial market, labor and capital have positive impact on economic growth while consumer price index and interest rate have negative impact on economic growth of Pakistan. It is suggested that government should increase the investment in energy sector and improve the institutional quality in the country while financial reforms and restructuring of financial sector will promote private lending so unemployment will be reduced.

The Impact of Financial Development on Energy Consumption: Evidence from an Oil-Rich Economy

Energies, 2018

This paper examines the relationship between energy consumption, financial development, and economic growth in an oil-rich economy-Azerbaijan-employing cointegration techniques to the data ranging from 1992 to 2015. The results confirm the existence of a long-run relationship among the variables. Also, we find that there is a positive and statistically significant impact of financial development and economic growth on energy consumption in the long-run. The positive and statistically significant coefficient of financial development and decreasing volatility in the proxy for financial development over time can be considered as improvements in the financial system. Estimation results show that a 1% increase in financial development, proxied by the private credit indicator, and economic development increases energy consumption by 0.19% and 0.12%, respectively. The positive and significant impact of financial development on energy consumption on the backdrop of relatively cheaper energy prices due to rich oil and gas resources, should be considered by policymakers in their energy use, financial development, and economic growth related decisions.