Testing the resources curse hypothesis: Unleashing the role of national governance and financial development in OPEC countries

Kaiyuan Hou, Rabia Qammar, Conghao Zhu, Muhammad Usman and Shujaat Abbas

Resources Policy, 2023, vol. 86, issue PB

Abstract: Financial development is an inclusive objective for economies worldwide, but its connection with natural resources remains a topic of debate. This study aims to address this gap by investigating the impact of the resource-curse hypothesis on economic development in Organization of the Petroleum Exporting Countries (OPEC) countries during the period 1996 to 2021, given their substantial natural resources. Employing a cross-sectional ARDL (CS-ARDL) framework and validating the cointegration results with the Pedroni, Westerlund, and Kao Co-integration tests, this research surprisingly challenges the conventional wisdom of the resource-curse hypothesis. Instead, it reveals that natural resource rents can be beneficial for promoting financial development in high-income resource-rich economies. Furthermore, the study uncovers positive associations between financial development and key factors such as government effectiveness, regulatory quality, renewable energy adoption, economic growth, and urbanization. The findings underscore the significance of strong institutional frameworks in fostering financial development and offer valuable policy recommendations to enhance financial progress in OPEC countries.

Keywords: Environmental sustainability; Financial development; Natural resources rents; Government effectiveness; Climate change: OPEC countries (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:86:y:2023:i:pb:s0301420723009534

DOI: 10.1016/j.resourpol.2023.104242

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