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Financial development and resource-curse hypothesis: Moderating role of internal and external conflict in the MENA region

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  • Li, Kaixian
  • Wang, Dongyu
  • Xu, Tong
  • Zhang, Yuqi

Abstract

“Resource curse hypothesis” has been extensively pondered in extant literature. However, less attention has been given to political risks and financial development (FD) in the Middle East and North African countries (MENA). Hence, this current study explores the role of internal and external conflicts in realizing the impact of natural resources on FD (Resource Curse) based on the foundations of resource endowment theory from 1990 to 2021. We test whether the resource curse hypothesis is effective for MENA nations during internal and external conflicts. The outcomes of moments quantile regression (MMQR) show that this study negates the resource curse hypothesis (NRC) because NRR supports FD in MENA countries. Internal and external conflicts impede FD; however, external conflicts show a stronger magnitude. When countries face internal and external conflicts, the resource blessing hypothesis does not hold anymore; rather, it becomes a resource curse. The negative sign of interaction terms of the NRR and internal and external conflicts capture this notion. Lastly, technological innovation facilitates FD. These conclusions are indispensable for conflict resolution and financial policies across conflict-prone and resource curse nations.

Suggested Citation

  • Li, Kaixian & Wang, Dongyu & Xu, Tong & Zhang, Yuqi, 2024. "Financial development and resource-curse hypothesis: Moderating role of internal and external conflict in the MENA region," Resources Policy, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:jrpoli:v:90:y:2024:i:c:s0301420724001120
    DOI: 10.1016/j.resourpol.2024.104745
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