Natural Resources, Financialization and Economic Growth: Empirical Evidence in a Global Sample

Abstract

The nexus between natural resources and economic growth remains one of the great controversies in economic literature. The objective of this study is to examine this relationship by considering the role of financial development. We use data from 162 countries, covering the period from 1996 to 2017. The methodology is based on a long-run analysis and a nonlinear panel model exploring the non-linearity impact of natural resources and financialisation on economic growth, and threshold effects. The results of the estimates show a differentiated effect based on the level of development of countries: natural resource income negatively affects long-term growth in low-income countries, while it has no significant effect for high-income countries. Moreover, while the degree of financial development can mitigate the adverse effects of natural resources on growth, the phenomenon is non-linear in the sense that there are thresholds of financial development necessary to reverse the natural resource curse.