Multidimensional financial development and natural resources: A path for sustainable development via natural resources and digitalization

Abstract

An excess of studies are presented concerning the linkage of natural resources-economic-growth-sustainable development; however, the role of natural resources and economic expansion in multidimensional financial development is lacking, particularly in the context of the USA. This study underpins the extant literature by examining the role of natural resources and economic growth on the financial development index of the USA from 1980 to 2021. The research also encompassed digitalization as a controlling co-variates in the study. Various time series econometric procedures have been leveraged to analyze the data, which contains two-unit root tests (ADF and Phillips Perron tests) to determine the static properties of the variables before examining the long-term equilibrium (Bayer and Hanck cointegration test) between variables for the long run elasticities between variables, FMOLS, DOLS, and CCR is used. We also deployed robustness check analysis tests in the study. The outcomes of the research demonstrate asymmetric results. Mineral rents and natural gas rents significantly and positively improve financial development, while oil rents and coal rents have detrimental effects on the financial development index of the USA. In a non-parametric test of quantile regression, the results are similar, but mineral and natural gas rents are insignificant and positive. GDP and digitalization also improve the financial development index. The robustness check also validates the results of the preferred models. The causality analysis exhibits that GDP, natural resources (mineral rents, coal rents, oil rents, natural gas rents), and digitalization have bi-directional causality with the financial development index and confirm the feedback effect. Based on the observed outcomes, the study endorses pertinent policies to policymakers regarding the financial development index by taming digitization, economic expansion, and NRR.