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Financial development and resources curse hypothesis: China's COVID-19 perspective of natural resources extraction

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  • Hu, Hao
  • Li, Ruida
  • Zhang, Leilei

Abstract

The current pandemic has increased natural resource volatility and unpredictability, impacting every economic and financial sector. Health problems and financial losses worsen the situation and push countries dangerously close to recession. This research examines the effects of natural resource rents on China's financial growth from 1988 to 2021, including the effects of oil, mineral, and forest rents. The study also covered other financial growth aspects, such as spending on R&D and renewable energy. So, in order to review our data, we also incorporated conventional and second-generation diagnostic tests. We used ADF with structural breaks and ADF-GLS to test the data's stationarity. The Johansen cointegration test is used to determine long-term cointegration. FMOLS, DOLS, CCR, and least squares with break years were used in the research to examine the factors' long-term impacts. At the same time, non-parametric quantile regression was included at the end to examine the findings non-parametrically as part of the robustness check. The results show long-term cointegration between variables and that the variables are static at the difference. Furthermore, long-term results show that oil and forest rentals have a detrimental influence on financial development. Mineral rents, on the other hand, have little and ambiguous long-term impacts. Investments in renewable energy and R&D. favorably and considerably impact financial development. The robustness findings show that, in contrast to R&D and renewable energy gains, oil rents also become small with time across all quantiles. The other factors continue to have a comparable impact and their results are consistent with the major findings.

Suggested Citation

  • Hu, Hao & Li, Ruida & Zhang, Leilei, 2023. "Financial development and resources curse hypothesis: China's COVID-19 perspective of natural resources extraction," Resources Policy, Elsevier, vol. 85(PB).
    • Handle: RePEc:eee:jrpoli:v:85:y:2023:i:pb:s0301420723006761
    DOI: 10.1016/j.resourpol.2023.103965
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