Double jeopardy of resources and investment curse in South Asia: Is technology the only way out?

Abstract

The financial development and economic prosperity is impacted by the abundance of natural resources. There have been many studies that have explored the nexus between economic growth and resource abundance. However, none of these have thoroughly assessed this relationship in resource-abundant and highly populous South Asia. Our research attempts to analyze this phenomenon by employing data from seven South Asian countries for the period between 1990 and 2017. We employ investment freedom together with natural resources abundance, technological innovation, and trade in the financial development demand function. The findings support the presence of the resources curse hypothesis for South Asian countries. Furthermore, we observe that the investment freedom is negatively related to financial development. In contrast, technological innovation and increasing trade promote financial development. We suggest that South Asian economies should focus on flexible capital flows, conducive investment policies, optimize natural resource mobilization, and must concentrate on technological adaption to foster economic growth.