Re-examining resources taxes and sustainable financial expansion: An empirical evidence of novel panel methods for China's provincial data

Abstract

The current study explores the most overlooked question regarding the role of natural resources (TNRR) in financial development. Besides, this research also aims to analyze the factors affecting financial development in Chinese (30) provinces, particularly during the 1995–2017 period. Specifically, green finance, energy investment, and economic growth are added as control variables to the model. Utilizing the second-generation unit root estimator, this study observed that all the study variables are stationary. Considering the abnormal distribution of the variables, this study utilizes the novel method of moment quantile regression. Empirical results of the study reveal that TNRR asymmetrically affects financial development. However, green finance, economic growth, and energy investment are significant factors of financial development. Based on the results of robust panel quantile regression, this study validates that natural resources are a curse for financial development in the region. This study also validates the two-way causality between the study variables – indicating that any policy-level changes in regressors could affect financial development and vice versa. Following the empirical outcomes, this study also suggested policies that could help transform resource curses into blessings.