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Resource cursed or resource blessed? The role of investment and energy prices in G7 countries

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  • Wei, Hua
  • Rizvi, Syed Kumail Abbas
  • Ahmad, Ferhana
  • Zhang, Yuchen

Abstract

An extensive literature review is available pertaining to the role of natural resources abundance in explaining financial development; however, there are only a few studies that investigated the relationship between the two variables in the presence of energy prices and investment. This study, therefore, analyzes the relationship between natural resources abundance and financial development along with two new covariates, which are investment and energy prices for the sample of G7 countries spanning over 1990–2017. This study employs a new financial development proxy, which is a broad measure that covers the accessibility, efficiency, and depth of financial institutions and markets. The empirical results are obtained through the augmented mean group (AMG) approach. Our findings reveal a positive relationship between natural resources abundance and financial development for G7 countries refuting the existence of resources curse hypothesis while energy prices are found to be negatively linked with financial development. In contrast, investment is found to have a positive relationship with financial development. This study suggests strengthening the investment-friendly environment to attract more investment along with stable energy prices for promoting financial development. Moreover, efficient utilization and management of natural resources can help strengthen financial institutions and markets.

Suggested Citation

  • Wei, Hua & Rizvi, Syed Kumail Abbas & Ahmad, Ferhana & Zhang, Yuchen, 2020. "Resource cursed or resource blessed? The role of investment and energy prices in G7 countries," Resources Policy, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:jrpoli:v:67:y:2020:i:c:s0301420720301963
    DOI: 10.1016/j.resourpol.2020.101663
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