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Does natural resource curse in finance exist in Africa? Evidence from spatial techniques

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  • Nurmakhanova, Mira
  • Elheddad, Mohamed
  • Alfar, Abdelrahman J.K.
  • Egbulonu, Alloysius
  • Zoynul Abedin, Mohammad

Abstract

This paper aims to examine the relationship between financial development and natural resources. By using panel data of 20 selected African countries from 1995 to 2020, we investigate whether all types of financial development have the same relationship with natural resources. In doing so, a recently developed novel estimation technique, spatial econometric, is employed for the first time to estimate the FD-NR relationship and account for the possible spillover effect of financial development in one country on the neighbouring countries. The novelty of this methodology is to consider structural breaks and the heterogeneity issues that are common in panel data. The main findings of this paper are that there is a robust negative effect of natural resource rents on both stock market capitalization ratio and available private credit. Furthermore, the empirical evidence suggests new insights for policymakers to use appropriate and sophisticated policies to boost the development of the financial sector in African countries over the long term. More policy implications are further discussed in this study.

Suggested Citation

  • Nurmakhanova, Mira & Elheddad, Mohamed & Alfar, Abdelrahman J.K. & Egbulonu, Alloysius & Zoynul Abedin, Mohammad, 2023. "Does natural resource curse in finance exist in Africa? Evidence from spatial techniques," Resources Policy, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:jrpoli:v:80:y:2023:i:c:s0301420722005943
    DOI: 10.1016/j.resourpol.2022.103151
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    Cited by:

    1. MS Hosen & SM Hossain & MN Mia & MR Chowdhury, 2024. "The Effects of COVID-19 and the Russia-Ukraine War on Inward Foreign Direct Investment," Papers 2401.03096, arXiv.org.
    2. Chi, Mingyuan & Ping, Wang, 2024. "Resources abundant economies and sustainability of economic growth: A novel panel evidence of high resources economies," Resources Policy, Elsevier, vol. 88(C).
    3. Sun, Lingyun & Hasi, Muqier, 2024. "Effects of mining sector FDI, environmental regulations, and economic complexity, on mineral resource dependency in selected OECD countries," Resources Policy, Elsevier, vol. 89(C).
    4. Wolde-Rufael, Yemane & Mulat-Weldemeskel, Eyob, 2023. "Is natural capital a blessing or a curse for capital accumulation in low income countries?," Resources Policy, Elsevier, vol. 85(PA).
    5. Adabor, Opoku, 2023. "The effect of financial development on natural gas resource rent in Ghana," Resources Policy, Elsevier, vol. 83(C).
    6. Zhang, Yueman & Danish, & Khan, Salah UD Din, 2023. "The role of energy poverty in the linkage between natural resources and economic performance: Resource curse or resource blessing?," Resources Policy, Elsevier, vol. 85(PB).

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    More about this item

    Keywords

    Natural resources; Financial development; Panel data; Spatial econometric techniques; Africa;
    All these keywords.

    JEL classification:

    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G0 - Financial Economics - - General

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