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Financial development and resource curse: panel threshold evidence


Sarmidi, Tamat and Law, Siong Hook and Mohd Salleh, Norlida Hanim (2012) Financial development and resource curse: panel threshold evidence. In: Seventh Malaysian National Economic Conference (PERKEM VII), 4-6 June 2012, Hotel Kinta Riverfront, Ipoh, Perak, Malaysia. (pp. 1405-1413).


This paper examines the relationship between natural resources and financial development using non-dynamic panel threshold analysis. This paper contributes to the natural resource curse (NRC) literature in three main areas. First, we focus on the relationship between resource abundance and financial development which is rarely discussed in the NRC literature. Second, we suppose that the relationship between resource abundance and financial development may not necessarily monotonic. It is because many relationships between economic variables are not linear throughout time or space due to natural cycle of economics forces. Therefore it might be the case that at one level of natural resources, the effect to financial development is negative while at another level the effect might be positive. Third, development of social capital seems to be an important mechanism for nullifying the NRC paradox. Employing an endogenous non-dynamic panel threshold estimation technique, we find four important results; first, the relationship between natural resource and financial development is non-monotonic; second, human development contributes positively to the financial development; third, the existence of NRC hypothesis in the finance-resource nexus is depending on the level of human development. Low human development economies experience negative contribution of natural resources to financial development, while this relationship is not applicable for high human development economies.

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Additional Metadata

Item Type: Conference or Workshop Item (Paper)
Divisions: Faculty of Economics and Management
Publisher: School of Economics, Faculty of Economics and Management, Universiti Kebangsaan Malaysia
Keywords: Natural resources; Financial development; Non-dynamic panel threshold analysis; Natural resource curse (NRC)
Depositing User: Nabilah Mustapa
Date Deposited: 01 Nov 2016 04:50
Last Modified: 01 Nov 2016 04:50
URI: http://psasir.upm.edu.my/id/eprint/48852
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