Natural resources rents, capital formation and economic performance: Evaluating the role of globalization

Abstract

In recent decades, natural resources have been regarded as an important factor for the economic performance of the countries. However, developed economies are more recognized for better Globalization and the use of renewable Energy. This study aims to analyze the influence of natural resources rents, Globalization, renewable energy consumption, and gross capital formation on the economic performance of the group of seven economies over the period 1990–2020. This study used panel data specifications such as slope heterogeneity and cross-section dependence. Also, this study used the second-generation unit root test, which confirms the stationarity of all variables. All the variables are found in the long-run cointegration relationship but hold the property of non-normality. Hence, this study uses a novel Method of Moments Quantile Regression. The estimated outcomes asserted that natural resources rents, Globalization, and gross capital formation positively and significantly impact economic performance in all (Q0.25, Q0.50, Q0.75, and Q0.85) quantiles. At the same time, renewable energy consumption adversely affects the panel economies' economic performance. Moreover, there are bidirectional causalities between the explanatory variables and economic performance. On the basis of empirical findings, this study recommends policies regarding the sustainable use of the natural resource, increased Globalization, gross capital formation, and revised policies for renewable energy consumption.