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The impact of financial development indicators on natural resource markets: Evidence from two-step GMM estimator

Author

Listed:
  • Rashid Khan, Haroon Ur
  • Islam, Talat
  • Yousaf, Sheikh Usman
  • Zaman, Khalid
  • Shoukry, Alaa Mohamd
  • Sharkawy, Mohamed A.
  • Gani, Showkat
  • Aamir, Alamzeb
  • Hishan, Sanil S.

Abstract

The financialization in energy and commodity markets is the overwhelming subject of energy and resource policy, which is exercised in the context of China to analyzed government financial policies to support natural resource markets during the period of 1967–2016. The results show that real interest rate supports energy and resource markets through increased energy production, oil rents, and crop production in a country. Money supply increases fossil fuel energy demand, energy efficiency, and agricultural and livestock production. Domestic credit provided by financial sector is negatively influenced to energy and resource markets with some exceptions. FDI inflows largely influenced soft and hard commodity markets to decrease natural resource rents and agricultural & livestock productions, except total fisheries production, which substantially increases FDI inflows in a country. The commodity prices distorted energy and natural resource markets except for ores and mineral exports that inflamed by higher price level. The growth-specific factors substantially improve the efficiency of energy & resource markets. Thus, the overall debate comes to the conclusion that commodity prices distorted energy and commodity markets, which may be subsidized by sound economic growth, trade liberalization policies, financial development, tight monetary policy, and optimized growth strategies in a country.

Suggested Citation

  • Rashid Khan, Haroon Ur & Islam, Talat & Yousaf, Sheikh Usman & Zaman, Khalid & Shoukry, Alaa Mohamd & Sharkawy, Mohamed A. & Gani, Showkat & Aamir, Alamzeb & Hishan, Sanil S., 2019. "The impact of financial development indicators on natural resource markets: Evidence from two-step GMM estimator," Resources Policy, Elsevier, vol. 62(C), pages 240-255.
    • Handle: RePEc:eee:jrpoli:v:62:y:2019:i:c:p:240-255
    DOI: 10.1016/j.resourpol.2019.04.002
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    More about this item

    Keywords

    Energy markets; Financialization; Natural resources; Commodity markets; Commodity prices; Growth specific factors; Simultaneous GMM estimator; China;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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