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Institutional quality and financial development: The United States perspective

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  • Khan, Muhammad Asif
  • Khan, Muhammad Atif
  • Abdulahi, Mohamued Elyas
  • Liaqat, Idrees
  • Shah, Sayyed Sadaqat Hussain

Abstract

This paper revisits the ambiguous natural resource rent and finance nexus in the context of the United States, incorporating the vital role of institutional quality in this paradigm. The literature on the subject matter lacks consensus and overlooks the institutional framework. The study utilizes a unique data set by the International Monetary Fund (IMF), considered the most comprehensive measure of financial development. Our findings based on a robust cointegration approach conclusively confirm that institutional quality is a significant prerequisite to financial development in the United States. The natural resource rent affects financial development negatively when we include proper controls in the estimation. However, we find that institutional quality moderates the natural resource rent and finance nexus. We recommend that policymakers and researchers consider the importance of institutions to come up with realistic estimations and policy inputs.

Suggested Citation

  • Khan, Muhammad Asif & Khan, Muhammad Atif & Abdulahi, Mohamued Elyas & Liaqat, Idrees & Shah, Sayyed Sadaqat Hussain, 2019. "Institutional quality and financial development: The United States perspective," Journal of Multinational Financial Management, Elsevier, vol. 49(C), pages 67-80.
    • Handle: RePEc:eee:mulfin:v:49:y:2019:i:c:p:67-80
    DOI: 10.1016/j.mulfin.2019.01.001
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    More about this item

    Keywords

    G34; G18; G28; P48; O13; P28; Institutional quality; Financial development; Natural resource rent;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment

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