Does the financialization of natural resources lead toward sustainability? An application of advance panel Granger non-causality

Abstract

The financial management of natural resources endowment is necessary to accomplish sustainable economic growth agenda. The previous literature on the elements leading to environmental deterioration has resorted largely to CO2 emissions or ecological footprint following a restrictive approach. A scarce body of studies has noted globalizing environmental pollution components, such as ecological status. The objective of the study is to probe the financialization of natural resources to meet sustainable targets in the context of the top ten natural resource-rich countries spanning the period 1990–2018. Empirical findings, based on a novel panel Granger technique (Juodis et al., 2021), disclose that natural resources contribute to ecological deterioration rather than preserving the environmental performance. Financial markets and institutions, on the other hand, have been effectively serving the environment to curtail the detrimental effects of natural resources on the environmental performance by providing solutions to help regulators to meet their economic and sustainability goals simultaneously. Further, it appears that economic growth validates the EKC hypothesis and leads to alleviating the atmospheric worth in the beginning whilst it preserves the environmental quality after reaching a threshold point. The outcomes documented in this study offer some appropriate policy implications to accomplish sustainable growth objectives.