Nexus between financialisation and natural resources rents: empirical evidence in a global sample

Abstract

Sustainable production and consumption are important goals of sustainable development. This study examines the relationships between natural resources rents and financialisation in a global sample. Nine indices from the Financial Development Index database of the International Monetary Fund are examined in the links with total natural resources rents in a global sample of 86 economies over the period 2002–2017. We find robust results by applying several econometric techniques for panel data. First, a strong mutual Granger causality exists between two variables, especially from financialisation to natural resources rents. Second, overall financial development appears to increase the natural resources rents through the positive influence of financial market depth. Meanwhile, financial institutions help reduce the natural resources rents, especially financial access and financial efficiency. By contrast, the increase in natural resources rents has positive effects on financial market depth but negative effects on financial institutions, and overall induces financial development. Third, evidence exists with regard to the long-term cointegration between financialisation and natural resources rents. The influence of financialisation on natural resources rents and the influence of natural resources rents on financialisation are confirmed in the long-run. Fourth, the links between financialisation and natural resources rents are found to be dominant in low- and middle-income economies and weak in high-income economies.