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The Role of Financial Development in Natural Resource Abundant Economies: Does the Nature of the Resource Matter?

The paper evaluates the role played by financial development in oil vis-�-vis non-oil (mining) economies using a panel data set for the period 1984-2003. A novel two-step, variance corrected system Generalized Method of Moments (GMM) estimator proposed by Windmeijer (2005) is applied to a dynamic panel of 44 developing economies. The data reveals that financial development plays a crucial role in influencing the efficiency of investment, thus economic performance of these economies. However, the potency of financial institutions is highly dependent on whether the economy is an oil or non-oil (mining) producer.

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File URL: http://www.uq.edu.au/economics/mrg/2208.pdf
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Paper provided by School of Economics, University of Queensland, Australia in its series MRG Discussion Paper Series with number 2208.

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Handle: RePEc:qld:uqmrg6:22
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  8. Thorsten Beck & Ross Levine & Norman Loayza, 1999. "Financial Intermediation and Growth: Causality and Causes," Working Papers Central Bank of Chile 56, Central Bank of Chile.
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  10. Denizer Cevdet A. & Iyigun Murat F. & Owen Ann, 2002. "Finance and Macroeconomic Volatility," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-32, October.
  11. Saint-Paul, G., 1990. "Technological Choice, Financial Markets and Economic Development," DELTA Working Papers 90-30, DELTA (Ecole normale supérieure).
  12. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
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  14. Nili, Masoud & Rastad, Mahdi, 2007. "Addressing the growth failure of the oil economies: The role of financial development," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(5), pages 726-740, February.
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  17. R Blundell & Steven Bond, "undated". "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
  18. Gylfason, Thorvaldur & Zoega, Gylfi, 2001. "Natural Resources and Economic Growth: The Role of Investment," CEPR Discussion Papers 2743, C.E.P.R. Discussion Papers.
  19. Beck, Thorsten & Levine, Ross, 2004. "Stock markets, banks, and growth: Panel evidence," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 423-442, March.
  20. Benhabib, Jess & Spiegel, Mark M, 2000. "The Role of Financial Development in Growth and Investment," Journal of Economic Growth, Springer, vol. 5(4), pages 341-360, December.
  21. Stephen Bond & Anke Hoeffler & Jonathan Temple, 2001. "GMM Estimation of Empirical Growth Models," Economics Papers 2001-W21, Economics Group, Nuffield College, University of Oxford.
  22. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-1395, November.
  23. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  24. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-558, June.
  25. Hayakawa, Kazuhiko, 2007. "Small sample bias properties of the system GMM estimator in dynamic panel data models," Economics Letters, Elsevier, vol. 95(1), pages 32-38, April.
  26. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
  27. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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