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Asymmetric relationship between natural resources extraction policy and financial development exist? A conflict and comparative analysis between China and US

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  • Liang, Xuefang
  • Qianqian, Ding
  • Xiaozhou, Zhu
  • Ullah, Midrar

Abstract

This study examines how natural resource extraction policy can asymmetrically affect financial development in China and the U.S. This occurs due to over-reliance on a single sector, lack of diversity, economic instability, and the risk of becoming a rentier state. To compare the asymmetric impact of total natural resource extraction towards financial development in China and the US, we analyzed data from 1970 to 2022. Our results confirm that mix order of integration via Augmented Dicky-Fuller and Phillip-Perron and long-run relationship is validated by applying bounds testing approach to cointegration. So, we have incorporated NARDL, alternatively known as asymmetrical Auto-Regressive Distributed Lag (NARDL). Given the long-run estimated results, the asymmetric connection of financial development with natural resources does not confirm as well as ambiguous for China and the US, respectively. This suggests that relying on natural resources can have varied and uneven effects on the overall development of financial system. Control factors, including economic growth, trade openness, and population density, have also been included in our proposed model. Except for trade openness for China, these factors are significant determinants of financial development in both countries.

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  • Liang, Xuefang & Qianqian, Ding & Xiaozhou, Zhu & Ullah, Midrar, 2024. "Asymmetric relationship between natural resources extraction policy and financial development exist? A conflict and comparative analysis between China and US," Resources Policy, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:jrpoli:v:90:y:2024:i:c:s0301420724001016
    DOI: 10.1016/j.resourpol.2024.104734
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    More about this item

    Keywords

    Natural resources extraction policy; Financial development; Asymmetrical ARDL;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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