Natural resources and economic perspective: Manufacturing value added for Europe and Central Asian economies

Abstract

A plethora of papers are available on the nexus of natural resources and economic growth; however, the attention to the nexus increased after the pandemic. Hence, our study contributes significantly to the literature by providing value-added manufacturing as another significant factor. Therefore, this study re-investigates the nexus of natural resources, manufacturing, and economic growth from 1989 to 2021. The study also included technological innovation and gross capital formation as additional determinants. Several time series methods are utilized, involving ADF with break years, conventional DF-GLS for unit root purpose, and Bayer-Hanck cointegration for long-term equilibrium. Moreover, the study included two parametric approaches: FMOLS, DOLS, CCR, and simple least squares with break years, and one non-parametric approach, quantile regression. Robust least squares and simple least squares are employed for robustness check analysis. The results reveal that natural resources have a resource curse which reveals that natural resources have a negative and significant influence on economic growth in European and Central Asian economies. Moreover, Gross capital formation and technological innovation significantly improve economic growth, while value-added manufacturing adversely affected the economic growth of European and Central Asian economies. The robustness protocols of the study provide similar, valid, and robust outcomes. This study recommends appropriate policies to policymakers for the sustainable use of natural resources, manufacturing with added value, advancements in technical innovation, and promotion of gross capital creation based on empirical findings.