Does escaping the natural resource curse complement evading the financial resource curse too? Empirical evidence from Indonesia

Abstract

Natural resources revenues are critical to the real economy, and so is to the financial system of an economy, yet empirical shreds of evidence relating to natural resource curse and blessings persist. This study examines whether evading the natural resource curse complements evading the financial resource curse and whether there is any moderating effect of institutional quality. This study examines the economy of Indonesia by engaging data from 1984 to 2019 to examine the research question. The current study demonstrated a positive outcome of resources revenues on economic growth and financial development. Moreover, there is a moderating role of institutional quality in enhancing the financial resource blessing, thus validating the hypotheses. The results identified unidirectional causation from economic growth to domestic investment and foreign investment. This study recommends that policymakers, academic scholars, and researchers consider the importance of resource revenues and institutional quality to chalk out the strategy for promoting financial development.