How does inflation rate influence the resource utilization policy? New empirical evidence from OPEC countries

Zhichao Yu, Umar Farooq, Nizomjon Khajimuratov Shukurullaevich, Mohammad Mahtab Alam and Jiapeng Dai

Resources Policy, 2024, vol. 91, issue C

Abstract: As the global economic climate continuously evolves, understanding the nuanced relationship between inflation rates and resource utilization has become imperative for policymakers and industry stakeholders. In view of this, this study aims to investigate the intricate relationship between inflation rates and the utilization policies of natural resources. The empirical analysis was conducted on 20 years of data over the period 2000 to 2019 of 13 OPEC countries. We utilize the FMOLS (fully modified ordinary least squares) and DOLS (dynamic OLS) models to establish the regression among the variables. The empirical findings reveal a noteworthy negative impact of inflation rates on resource rents, specifically affecting coal rent, oil rent, mineral rent, and natural gas rent. This suggests that higher inflation rates are associated with decreased profitability and returns in the extraction and utilization of these critical resources. The analysis further reveals a positive effect of control variables including banking sector development, FDI inflow, and labor force on resource rent, highlighting their instrumental role in enhancing the utilization of natural resources. These insights offer valuable guidance for policymakers tasked with formulating strategies to address challenges stemming from inflation within the resource sector. The study's novelty stems from its exploration of complex relationship between inflation rates and resource utilization policies in OPEC countries.

Keywords: Inflation rate; Resource rents; Resource policy; OPEC; FDI inflow (search for similar items in EconPapers)
JEL-codes: E31 O13 Q32 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:91:y:2024:i:c:s0301420724002290

DOI: 10.1016/j.resourpol.2024.104862

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