Revisiting the economic policy uncertainty and resource rents nexus: Moderating impact of financial sector development in BRICS

Wanqing Yu, Yufei Gan, Bingjun Zhou and Jiapeng Dai

International Review of Financial Analysis, 2024, vol. 94, issue C

Abstract: Economies abundant in resources offer substantial potential for economic growth and development. However, they often face the effects of uncertainty in economic policies. This research investigates the intricate connection between economic policy uncertainty (EPU) and resource rents (TRR). Additionally, it explores how financial development (FD) plays a moderating role in the liaison between EPU and TRR. The study utilizes a dataset covering two decades, from 2000 to 2019, concentrating on the BRICS economies (Brazil, Russia, India, China, and South Africa). The FMOLS and DOLS techniques were conducted for analysis purpose. The findings disclose that EPU has a detrimental impact on TRR, highlighting the adverse consequences of economic uncertainty on resource management and development. Conversely, FD has a positive influence on TRR, underscoring the importance of a well-developed financial sector in maximizing resource revenue. Importantly, the study shows that FD helps to ease the negative effects of EPU on TRR, emphasizing the critical role of financial development in enhancing the resilience of resource rents in the face of EPU. This research provides valuable insights for policymakers and investors, offering a comprehensive understanding of how EPU, financial development, and various economic factors interact within the resource-rich BRICS nations. It underscores the significance of promoting financial development and reducing economic uncertainty to optimize the use of resource rents for sustainable economic growth. In contrast to prior studies that examined the separate impacts of EPU and FD on resource rents, this study brings a unique perspective by investigating the moderating role of financial development.

Keywords: BRICS; EPU; FSD; Resource rents; FDI inflow (search for similar items in EconPapers)
JEL-codes: O16 Q32 Q34 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:94:y:2024:i:c:s1057521924002564

DOI: 10.1016/j.irfa.2024.103324

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