IDEAS home Printed from https://ideas.repec.org/a/eee/jrpoli/v90y2024ics0301420724001260.html
   My bibliography  Save this article

Natural resources and the trilemma of financial development, institutions, and markets: Sustainable development pathway via natural resources for China

Author

Listed:
  • Zhong, Yufei
  • Chen, Xuesheng
  • Yao, Xuehui
  • Wang, Zhixian
  • Chang, Hsu-Ling

Abstract

A plethora of studies are available on the linkage of natural resources, economic growth, and financial development. However, studies on the different financial indices are lacking in the literature concerning sustainable development; hence, to cover the gaps in the literature, this study evaluates the nexus of natural resources with the trilemma of financial development, markets, and institutions in China from 1983 to 2021. The study also checked the role of government expenditures (GEXEDU), renewable electricity (EREC), and economic growth (GDP). Several econometric strategies have been deployed as time series data, including ADF with break years to check the unit root in the data and Bayer-Hanck for each predicted variable to ensure the long-run equilibrium of explanatory variables with the predicted one. FMOLS and CCR are utilized for primary estimations, while the robust least squares method is used for robustness checks. The outcomes indicate that all variables are found static at level except the financial development index and renewable electricity, whereas long-run cointegration has been confirmed between all models. The primary outcomes reveal that GDP stimulates financial development and its three indices, while natural resources have a resource curse in financial development multidimensional and institutional indices while blessing exists on the financial markets index. Moreover, the negative effect of government education expenditures is present only in the financial markets index, while renewable electricity has a positive and significant influence on financial development multidimensional and market indices. Moreover, renewable electricity reduces the financial markets index in the short and long run. Besides, robustness check analysis provides similar outcomes that are robust and valid. Relevant policies regarding the nexus of natural resources and financial development indices are suggested.

Suggested Citation

  • Zhong, Yufei & Chen, Xuesheng & Yao, Xuehui & Wang, Zhixian & Chang, Hsu-Ling, 2024. "Natural resources and the trilemma of financial development, institutions, and markets: Sustainable development pathway via natural resources for China," Resources Policy, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:jrpoli:v:90:y:2024:i:c:s0301420724001260
    DOI: 10.1016/j.resourpol.2024.104759
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301420724001260
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.resourpol.2024.104759?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Usman, Muhammad & Jahanger, Atif & Makhdum, Muhammad Sohail Amjad & Balsalobre-Lorente, Daniel & Bashir, Adnan, 2022. "How do financial development, energy consumption, natural resources, and globalization affect Arctic countries' economic growth and environmental quality? An advanced panel data simulation," Energy, Elsevier, vol. 241(C).
    2. Park, Joon Y, 1992. "Canonical Cointegrating Regressions," Econometrica, Econometric Society, vol. 60(1), pages 119-143, January.
    3. Ebrahimi Salari, Taghi & Naji Meidani, Ali Akbar & Shabani Koshalshahi, Zeinab & Ajori Ayask, Amir Abbas, 2022. "The threshold effect of HDI on the relationship between financial development and oil revenues," Resources Policy, Elsevier, vol. 76(C).
    4. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    5. Christian Bayer & Christoph Hanck, 2013. "Combining non-cointegration tests," Journal of Time Series Analysis, Wiley Blackwell, vol. 34(1), pages 83-95, January.
    6. Peter C. B. Phillips & Bruce E. Hansen, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(1), pages 99-125.
    7. Han, Jingwei & Raghutla, Chandrashekar & Chittedi, Krishna Reddy & Tan, Zhixiong & Koondhar, Mansoor Ahmed, 2022. "How natural resources affect financial development? Fresh evidence from top-10 natural resource abundant countries," Resources Policy, Elsevier, vol. 76(C).
    8. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    9. Abbas, Jawad & Wang, Lisu & Ben Belgacem, Samira & Pawar, Puja Sunil & Najam, Hina & Abbas, Jaffar, 2023. "Investment in renewable energy and electricity output: Role of green finance, environmental tax, and geopolitical risk: Empirical evidence from China," Energy, Elsevier, vol. 269(C).
    10. Li, Menghan & Zhang, Kaiyue & Alamri, Ahmad Mohammed & Ageli, Mohammed Moosa & Khan, Numan, 2023. "Resource curse hypothesis and sustainable development: Evaluating the role of renewable energy and R&D," Resources Policy, Elsevier, vol. 81(C).
    11. Zhang, Can & Liang, Qian, 2023. "Natural resources and sustainable financial development: Evidence from South Asian economies," Resources Policy, Elsevier, vol. 80(C).
    12. Chang, Lei & Qian, Chong & Dilanchiev, Azer, 2022. "Nexus between financial development and renewable energy: Empirical evidence from nonlinear autoregression distributed lag," Renewable Energy, Elsevier, vol. 193(C), pages 475-483.
    13. Suleman Sarwar & Dalia Streimikiene & Rida Waheed & Zouheir Mighri, 2021. "Revisiting the empirical relationship among the main targets of sustainable development: Growth, education, health and carbon emissions," Sustainable Development, John Wiley & Sons, Ltd., vol. 29(2), pages 419-440, March.
    14. Peter Boswijk, H., 1994. "Testing for an unstable root in conditional and structural error correction models," Journal of Econometrics, Elsevier, vol. 63(1), pages 37-60, July.
    15. Safi, Adnan & Haseeb, Muhammad & Islam, Madeeha & Umar, Muhammad, 2023. "Can sustainable resource management overcome geopolitical risk?," Resources Policy, Elsevier, vol. 87(PB).
    16. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    17. Tang, Chang & Irfan, Muhammad & Razzaq, Asif & Dagar, Vishal, 2022. "Natural resources and financial development: Role of business regulations in testing the resource-curse hypothesis in ASEAN countries," Resources Policy, Elsevier, vol. 76(C).
    18. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    19. Liu, Haiying & Saleem, Muhammad Mansoor & Al-Faryan, Mamdouh Abdulaziz Saleh & Khan, Irfan & Zafar, Muhammad Wasif, 2022. "Impact of governance and globalization on natural resources volatility: The role of financial development in the Middle East North Africa countries," Resources Policy, Elsevier, vol. 78(C).
    20. Mukhtarov, Shahriyar & Yüksel, Serhat & Dinçer, Hasan, 2022. "The impact of financial development on renewable energy consumption: Evidence from Turkey," Renewable Energy, Elsevier, vol. 187(C), pages 169-176.
    21. Ngo Thai Hung, 2022. "Time–frequency nexus between globalization, financial development, natural resources and carbon emissions in Vietnam," Economic Change and Restructuring, Springer, vol. 55(4), pages 2293-2315, November.
    22. Gao, Song & Zhu, Yating & Umar, Muhammad & Kchouri, Bilal & Safi, Adnan, 2024. "Financial inclusion empowering sustainable technologies: Insights into the E-7 economies from COP28 perspectives," Technological Forecasting and Social Change, Elsevier, vol. 201(C).
    23. Zheng, Liya & Umar, Muhammad & Safi, Adnan & Khaddage-Soboh, Nada, 2024. "The role of higher education and institutional quality for carbon neutrality: Evidence from emerging economies," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 406-417.
    24. Ali, Adnan & Ramakrishnan, Suresh & Faisal,, 2022. "Financial development and natural resources. Is there a stock market resource curse?," Resources Policy, Elsevier, vol. 75(C).
    25. Li, ChangZheng & Umair, Muhammad, 2023. "Does green finance development goals affects renewable energy in China," Renewable Energy, Elsevier, vol. 203(C), pages 898-905.
    26. Shahriyar Mukhtarov & Sugra Humbatova & Natig Gadim-Oglu Hajiyev & Sannur Aliyev, 2020. "The Financial Development-Renewable Energy Consumption Nexus in the Case of Azerbaijan," Energies, MDPI, vol. 13(23), pages 1-14, November.
    27. Khan, Zeeshan & Hossain, Mohammad Razib & Badeeb, Ramez Abubakr & Zhang, Changyong, 2023. "Aggregate and disaggregate impact of natural resources on economic performance: Role of green growth and human capital," Resources Policy, Elsevier, vol. 80(C).
    28. Alexandra Horobet & Irina Mnohoghitnei & Emanuela Marinela Luminita Zlatea & Lucian Belascu, 2022. "The Interplay between Digitalization, Education and Financial Development: A European Case Study," JRFM, MDPI, vol. 15(3), pages 1-23, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Shi & Chen, Lei & Jiang, Tao & Wang, YingJie & Shen, Congcong, 2024. "Multidimensional financial development and natural resources: A path for sustainable development via natural resources and digitalization," Resources Policy, Elsevier, vol. 88(C).
    2. Zhang, Meng-Chen & Lin, Chun-Yu & Wei, Ying, 2023. "Natural resources exploration, efficiency of energy resources and financial development: Resources sector analysis via least square with structural breaks," Resources Policy, Elsevier, vol. 85(PA).
    3. Wang, Zhen & Hu, Difei & Sami, Fariha & Uktamov, Khusniddin Fakhriddinovich, 2023. "Revisiting China's natural resources-growth-emissions nexus: Education expenditures and renewable energy innovation," Resources Policy, Elsevier, vol. 85(PA).
    4. Alsagr, Naif, 2024. "Revisiting the natural resources rent and financial development nexus: Does geopolitical risk and corruption really matters?," Resources Policy, Elsevier, vol. 89(C).
    5. Xue, Pengcheng & Du, Jianhua & Liu, Jiaxin & Li, Zhipeng & Albahooth, Bayan & Yang, Yiting, 2023. "Natural resources and economic perspective: Manufacturing value added for Europe and Central Asian economies," Resources Policy, Elsevier, vol. 86(PA).
    6. Tian, Lulu & Yan, Wenying & Xu, Baochang & Hasnaoui, Amir, 2024. "Beyond the resource curse: The multifaceted impact of mineral resources, financial systems, and workforce competence," Resources Policy, Elsevier, vol. 89(C).
    7. Gong, Qinyi & Ying, Limeng & Dai, Jiapeng, 2023. "Green finance and energy natural resources nexus with economic performance: A novel evidence from China," Resources Policy, Elsevier, vol. 84(C).
    8. Wang, Xinghua & Su, Chi-Wei & Xue, Ziru & Xie, Xin, 2023. "Sustainable development goals perspective of natural resources: Does it paves the way for renewable sources of energy? A global case study," Resources Policy, Elsevier, vol. 86(PB).
    9. Wang, Shubin & Wang, Tingting & Li, Jiabao & Zhao, Erlong, 2023. "Resource curse hypothesis in COP26 perspective: Access to clean fuel technology and electricity from renewable energy," Resources Policy, Elsevier, vol. 82(C).
    10. 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).
    11. Lin, Ling & Li, Mu & Hou, Xinmeng & Zahid Piprani, Arsalan, 2024. "The resource curse in least developed countries: The roles of foreign direct investment, energy efficiency, and electricity access," Resources Policy, Elsevier, vol. 89(C).
    12. Yu, Ti-Ming & Yan, Yu-Tong & Yin, Ya-Hua & Yang, Ming-Gao, 2023. "Are natural resources and oil prices a possible solution to renewable energy electricity? Evidence from global time series data," Resources Policy, Elsevier, vol. 86(PB).
    13. Yu, Xiuzhi & Jia, Fengshuo & Khan, Suliman & Khan, Zeeshan & Nassani, Abdelmohsen A., 2024. "Natural resources a curse or blessings for international trade? Empirical evidence from high indebted economies," Resources Policy, Elsevier, vol. 89(C).
    14. Xie, Hao & Chang, Shuangshuang & Liu, Pengqiang & Lin, Regina Fang-Ying, 2024. "Sustainable development: Uncovering the synergy between natural resources, clean technologies, and economic progress," Resources Policy, Elsevier, vol. 88(C).
    15. Hao, Linna & Meng, Qin & Umar, Muhammad & Long, Chi, 2024. "Mineral resources and intellectual capital: Asymmetrical impacts and sustainable development outcomes," Resources Policy, Elsevier, vol. 91(C).
    16. Liu, Bailu & Tian, Jilin, 2023. "Natural resources led innovation: Employing structural break approach to explore USA's natural resources sector," Resources Policy, Elsevier, vol. 85(PA).
    17. Chen, Fu & Xu, Jie & Zhang, Weiwei & Wei, Bowen & Li, Tingting, 2023. "Capital formation and natural resources extraction: A source of sustainable development or a curse for the economy?," Resources Policy, Elsevier, vol. 85(PB).
    18. Wan, Muchun & Mughal, Nafeesa & Peng, Tao & Yepez Peña, Miguel Angel, 2024. "Resources extraction and access to clean energy a curse or blessing for the economy? Middle-income economies case study," Resources Policy, Elsevier, vol. 88(C).
    19. Chen, Zhiguo & Gao, Wei & Zafar, Quratulain & Dördüncü, Hazar, 2023. "Natural resources extraction and geopolitical risk: Examining oil resources extraction in China," Resources Policy, Elsevier, vol. 85(PA).
    20. Xu, Siyun & Zhang, Xuebin & Lee, Kyung-Jae, 2024. "Channelizing the importance of natural resources and renewable energy for financial development: Resources curse perspective for high growth countries," Resources Policy, Elsevier, vol. 89(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jrpoli:v:90:y:2024:i:c:s0301420724001260. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30467 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.