The Impact of Natural Resources on Financial Development: The Global Perspective

Using a time series approach, this thesis investigates how natural resources impact financial development from a global perspective for the period 1980-2019. Johansen cointegration test has revealed that the variables are in a long-run equilibrium relationship. The vector error correction model (VECM) has estimated the coefficient of the error correction term (ECT) which suggests that the short-run values of natural resources, economic growth, trade openness, population growth, and investments contribute to financial development converging to its long-run equilibrium level by a 23.63% speed of adjustment every year. The estimated coefficients suggest that global natural resource rent has a statistically-significant negative impact on global financial development in the long-run, but not in the short-run. Causality test results imply that neither global natural resource rent nor global financial development Granger-causes each other.