Does an asymmetric nexus exist between financial deepening and natural resources for emerging economy? Evidence from multiple break cointegration test

Abstract

This study investigates the asymmetric nexus between financial deepening and natural resources by incorporating the real gross domestic product, capital, education and natural resources using quarterly data from 1990Q1 to 2016Q4. This study applies the Carrion-i-Silvestre et al. (2009) five structural break test in addition to the conventional unit root test. Furthermore, the Maki (2012) cointegration technique is applied to determine the long-run relationship up to 5 structural breaks. In addition, the NARDL cointegration is further applied to determine the asymmetric long-run relationship among the variables. Moreover, the long-run results confirm a positive and insignificant impact of natural resources on financial deepening in both long-run positive and negative effects. Additionally, education has a positive and significant impact on financial deepening in a long-run positive effect, while capital has a negative and significant impact on financial deepening in the long-run negative effect. Moreover, the existence of an asymmetric relationship has been confirmed in a long-run asymmetry in all variables, in addition to the short-run asymmetry except natural resources. Finally, the asymmetric causality suggests the evidence of a bidirectional causality between the positive shock of financial development and the positive shock of natural resources. This suggests that significant investment in the banking sector for Turkey can leverage the natural resource sector.