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The criticality of natural resources in financial development: Does geopolitical risk make any difference?

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  • Qianqian, Ding
  • Bashir, Uzma
  • Chunqiao, Tan

Abstract

It is a well-established argument that financial development is a primary tool to achieve higher economic growth. Therefore, financial development is mandatory for both developed and developing economies. To improve financial development, there is a need to identify its impact factors. Although several impact factors of financial development are explored in existing literature, natural resources and financial development relationships are still confusing for policymakers. On top of this, the natural resources-financial development relationship amidst geopolitical risk is yet to be examined. Hence, we investigate the impact of natural resources on financial development amidst geopolitical risk for China using an annual time series dataset over the period 1990–2020. The results claim that economic growth and natural resources improve financial development, while geopolitical risk lessens financial development. Similarly, the combined impact of natural resources and geopolitical risk mitigates financial development in China. Hence, we invalidate the financial resource curse hypothesis while maintaining the level of geopolitical risk constant, whereas we validate the hypothesis if the geopolitical risk is simultaneously increasing. The findings propose to adopt policies that can promote economic growth and natural resources. Also, policies should be established to shrink geopolitical risk.

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  • Qianqian, Ding & Bashir, Uzma & Chunqiao, Tan, 2024. "The criticality of natural resources in financial development: Does geopolitical risk make any difference?," Resources Policy, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:jrpoli:v:89:y:2024:i:c:s0301420724000394
    DOI: 10.1016/j.resourpol.2024.104672
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