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Revisiting the economic policy uncertainty and resource rents nexus: Moderating impact of financial sector development in BRICS

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  • Yu, Wanqing
  • Gan, Yufei
  • Zhou, Bingjun
  • Dai, Jiapeng

Abstract

Economies abundant in resources offer substantial potential for economic growth and development. However, they often face the effects of uncertainty in economic policies. This research investigates the intricate connection between economic policy uncertainty (EPU) and resource rents (TRR). Additionally, it explores how financial development (FD) plays a moderating role in the liaison between EPU and TRR. The study utilizes a dataset covering two decades, from 2000 to 2019, concentrating on the BRICS economies (Brazil, Russia, India, China, and South Africa). The FMOLS and DOLS techniques were conducted for analysis purpose. The findings disclose that EPU has a detrimental impact on TRR, highlighting the adverse consequences of economic uncertainty on resource management and development. Conversely, FD has a positive influence on TRR, underscoring the importance of a well-developed financial sector in maximizing resource revenue. Importantly, the study shows that FD helps to ease the negative effects of EPU on TRR, emphasizing the critical role of financial development in enhancing the resilience of resource rents in the face of EPU. This research provides valuable insights for policymakers and investors, offering a comprehensive understanding of how EPU, financial development, and various economic factors interact within the resource-rich BRICS nations. It underscores the significance of promoting financial development and reducing economic uncertainty to optimize the use of resource rents for sustainable economic growth. In contrast to prior studies that examined the separate impacts of EPU and FD on resource rents, this study brings a unique perspective by investigating the moderating role of financial development.

Suggested Citation

  • Yu, Wanqing & Gan, Yufei & Zhou, Bingjun & Dai, Jiapeng, 2024. "Revisiting the economic policy uncertainty and resource rents nexus: Moderating impact of financial sector development in BRICS," International Review of Financial Analysis, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:finana:v:94:y:2024:i:c:s1057521924002564
    DOI: 10.1016/j.irfa.2024.103324
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    More about this item

    Keywords

    BRICS; EPU; FSD; Resource rents; FDI inflow;
    All these keywords.

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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