Natural resources and economic performance: Evaluating the role of political risk and renewable energy consumption

Abstract

This study aims to investigate the persistent issue of the last few decades, that whether natural resources enhance economic performance or negatively affect it. To serve this purpose, this study examines panel data for the Group of Seven economies from 1990–2020. This study also explores the influence of renewable energy consumption, political risk index, and gross capital formation. Since this study is dealing with panel data, advanced panel data approaches are utilized that indicate slopes heterogeneity and cross-section dependence of the selected panel. The normality tests asserted that all the variables follow non-normal or non-parametric distribution, which lets this study to use the novel method of moments quantile regression. The empirical results asserted the asymmetric influence of natural resources on economic performance. Natural resources, a curse in the lower (Q0.25, Q0.50) quantiles, while blessings in the upper (Q0.75, Q0.90) quantiles. However, Renewable energy had a negative influences on the economic performance of the said region. Besides, political risk holds a weak link with economic performance across the quantiles. Yet, throughout the selected quantiles, the gross capital formation is found to the positive and significant factor in economic performance. These results are found robust, validated via Bootstrap quantile regression and quantile regression. Based on the empirical results, this study suggests, relevant policies to policy-makers regarding the sustainable use of clean energy investment, natural resources, stability of political system, and encouragement of the gross capital formation.