Does natural resource curse in finance exist in Africa? Evidence from spatial techniques

Nurmakhanova M. Elheddad M. Alfar A.J.K. Egbulonu A. Zoynul Abedin M.
January 2023 Elsevier Ltd

Resources Policy
2023 #80

This paper aims to examine the relationship between financial development and natural resources. By using panel data of 20 selected African countries from 1995 to 2020, we investigate whether all types of financial development have the same relationship with natural resources. In doing so, a recently developed novel estimation technique, spatial econometric, is employed for the first time to estimate the FD-NR relationship and account for the possible spillover effect of financial development in one country on the neighbouring countries. The novelty of this methodology is to consider structural breaks and the heterogeneity issues that are common in panel data. The main findings of this paper are that there is a robust negative effect of natural resource rents on both stock market capitalization ratio and available private credit. Furthermore, the empirical evidence suggests new insights for policymakers to use appropriate and sophisticated policies to boost the development of the financial sector in African countries over the long term. More policy implications are further discussed in this study.

Africa , Financial development , Natural resources , Panel data , Spatial econometric techniques

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Department of Accounting and Finance, KIMEP University, Almaty, 050010, Kazakhstan
Teesside University International Business School, Middlesbrough, United Kingdom
Global Business School for Health, Univeristy College London, United Kingdom
School of Business and Creative Industries, University of West of Scotland, United Kingdom

Department of Accounting and Finance
Teesside University International Business School
Global Business School for Health
School of Business and Creative Industries

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