Nexus between natural resources and digital economy: The role of geopolitical risk

In the current age of globalization, the interplay between natural resources, geopolitical risk, and the digital economy assumes paramount significance. The vulnerability of natural resources, such as rare minerals and energy sources, to geopolitical conflicts arises from their indispensability in the production of digital technology. Geopolitical threats, encompassing trade disputes and resource wars, possess the potential to disrupt the digital supply chain, thereby exerting an influence on the global economy. In an era characterized by growing reliance on digital technologies, it becomes imperative for nations to effectively navigate these dynamics in order to ensure resource stability and sustained economic expansion. This study investigates the impact of natural resources and geopolitical risk on the digital economy in the BRICS nations from 2000 to 2021, employing the AMG methodology. The empirical findings suggest that the digital economy experiences adverse consequences from domestic GDP and geopolitical risk, whereas it benefits from global GDP, natural resource rent, and real effective exchange rate. In order to foster the advancement of the digital economy, it is recommended that policymakers prioritize the stimulation of innovation and diversification within the digital sector. Additionally, they should strengthen international trade linkages, implement sustainable resource management strategies, maintain exchange rate stability, mitigate geopolitical risks, and address the joint impact of natural resource rent and geopolitical risk through tailored policy measures. The implementation of these measures will create a favorable environment for the growth of the digital economy, thereby improving economic welfare and increasing competitiveness within the BRICS region.