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The impact of financial development indicators on natural resource markets: Evidence from two-step GMM estimator

Haroon Ur Rashid Khan, Talat Islam, Sheikh Usman Yousaf, Khalid Zaman, Alaa Mohamd Shoukry, Mohamed A. Sharkawy, Showkat Gani, Alamzeb Aamir and Sanil S. Hishan

Resources Policy, 2019, vol. 62, issue C, 240-255

Abstract: The financialization in energy and commodity markets is the overwhelming subject of energy and resource policy, which is exercised in the context of China to analyzed government financial policies to support natural resource markets during the period of 1967–2016. The results show that real interest rate supports energy and resource markets through increased energy production, oil rents, and crop production in a country. Money supply increases fossil fuel energy demand, energy efficiency, and agricultural and livestock production. Domestic credit provided by financial sector is negatively influenced to energy and resource markets with some exceptions. FDI inflows largely influenced soft and hard commodity markets to decrease natural resource rents and agricultural & livestock productions, except total fisheries production, which substantially increases FDI inflows in a country. The commodity prices distorted energy and natural resource markets except for ores and mineral exports that inflamed by higher price level. The growth-specific factors substantially improve the efficiency of energy & resource markets. Thus, the overall debate comes to the conclusion that commodity prices distorted energy and commodity markets, which may be subsidized by sound economic growth, trade liberalization policies, financial development, tight monetary policy, and optimized growth strategies in a country.

Keywords: Energy markets; Financialization; Natural resources; Commodity markets; Commodity prices; Growth specific factors; Simultaneous GMM estimator; China (search for similar items in EconPapers)
JEL-codes: C32 G21 Q43 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.resourpol.2019.04.002

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