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How does inflation rate influence the resource utilization policy? New empirical evidence from OPEC countries

Author

Listed:
  • Yu, Zhichao
  • Farooq, Umar
  • Shukurullaevich, Nizomjon Khajimuratov
  • Alam, Mohammad Mahtab
  • Dai, Jiapeng

Abstract

As the global economic climate continuously evolves, understanding the nuanced relationship between inflation rates and resource utilization has become imperative for policymakers and industry stakeholders. In view of this, this study aims to investigate the intricate relationship between inflation rates and the utilization policies of natural resources. The empirical analysis was conducted on 20 years of data over the period 2000 to 2019 of 13 OPEC countries. We utilize the FMOLS (fully modified ordinary least squares) and DOLS (dynamic OLS) models to establish the regression among the variables. The empirical findings reveal a noteworthy negative impact of inflation rates on resource rents, specifically affecting coal rent, oil rent, mineral rent, and natural gas rent. This suggests that higher inflation rates are associated with decreased profitability and returns in the extraction and utilization of these critical resources. The analysis further reveals a positive effect of control variables including banking sector development, FDI inflow, and labor force on resource rent, highlighting their instrumental role in enhancing the utilization of natural resources. These insights offer valuable guidance for policymakers tasked with formulating strategies to address challenges stemming from inflation within the resource sector. The study's novelty stems from its exploration of complex relationship between inflation rates and resource utilization policies in OPEC countries.

Suggested Citation

  • Yu, Zhichao & Farooq, Umar & Shukurullaevich, Nizomjon Khajimuratov & Alam, Mohammad Mahtab & Dai, Jiapeng, 2024. "How does inflation rate influence the resource utilization policy? New empirical evidence from OPEC countries," Resources Policy, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:jrpoli:v:91:y:2024:i:c:s0301420724002290
    DOI: 10.1016/j.resourpol.2024.104862
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    More about this item

    Keywords

    Inflation rate; Resource rents; Resource policy; OPEC; FDI inflow;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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