Does natural resource curse in finance exist in Africa? Evidence from spatial techniques

Mira Nurmakhanova, Mohamed Elheddad, Abdelrahman J.K. Alfar, Alloysius Egbulonu and Mohammad Zoynul Abedin

Resources Policy, 2023, vol. 80, issue C

Abstract: This paper aims to examine the relationship between financial development and natural resources. By using panel data of 20 selected African countries from 1995 to 2020, we investigate whether all types of financial development have the same relationship with natural resources. In doing so, a recently developed novel estimation technique, spatial econometric, is employed for the first time to estimate the FD-NR relationship and account for the possible spillover effect of financial development in one country on the neighbouring countries. The novelty of this methodology is to consider structural breaks and the heterogeneity issues that are common in panel data. The main findings of this paper are that there is a robust negative effect of natural resource rents on both stock market capitalization ratio and available private credit. Furthermore, the empirical evidence suggests new insights for policymakers to use appropriate and sophisticated policies to boost the development of the financial sector in African countries over the long term. More policy implications are further discussed in this study.

Keywords: Natural resources; Financial development; Panel data; Spatial econometric techniques; Africa (search for similar items in EconPapers)
JEL-codes: F21 G0 P33 Q0 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:80:y:2023:i:c:s0301420722005943

DOI: 10.1016/j.resourpol.2022.103151

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