Natural Resources, Institutional Quality and Financial Development in GCC Member Countries: Visiting ‘Resource Curse Hypothesis’ by DCCE Estimation

Authors

  • Muhammad Faheem Assistant Professor, School of Economics Bahauddin Zakariya University Multan, Pakistan
  • Imran Sharif Chaudhry Professor , School of Economics, Bahauddin Zakariya University, Multan, Pakistan
  • Sadam Hussain PhD Scholar, Dongbei University of Finance and Economics, China

DOI:

https://doi.org/10.47067/reads.v7i2.343

Keywords:

Financial Development, Natural Resource Rent, Institutional Quality, DCCE Approach, GCC Countries

Abstract

The main purpose of the study is to check whether natural resource rent affects the financial development or supporting the resource curse hypothesis by employing a recently developed estimation technique by Chudik and Pesaran (2015) from 1985 to 2017 in GCC member countries. The novelty of this methodology is to consider structural breaks and the heterogeneity issues that are common in panel data. The results of DCCE estimates are in support of the resource hypothesis that natural resource rent hurt financial development.  Additionally, this study takes moderation of institutional quality to check the threshold point or turning point where the natural resource rent effect becomes positive. Our results of interaction term postulate that a higher level of institutional quality mitigates the adverse effect of natural resource rent on financial development. The study results recommend the policy of natural resource rent in the presence of high institutional quality should continue because it improves the financial development in GCC member countries.

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Published

2021-05-31

How to Cite

Faheem, M., Chaudhry, I. S. ., & Hussain , S. . (2021). Natural Resources, Institutional Quality and Financial Development in GCC Member Countries: Visiting ‘Resource Curse Hypothesis’ by DCCE Estimation. Review of Economics and Development Studies, 7(2), 131-145. https://doi.org/10.47067/reads.v7i2.343