Revisiting the natural resources rent and financial development nexus: Does geopolitical risk and corruption really matters?

Abstract

A country's ability to prosper economically depends on having a robust financial system and a growing financial industry since they operate as the cornerstone for promoting economic activity and growth. Current study explores the relationship between Saudi Arabia's financial prosperity and its natural resources, namely oil rents by scrutinizing the moderating influence of corruption and geo-political risk. We further ecompassed the controlling effects of energy efficiency and economic growth in our study. Pertinent time series procedures are specified, which contain ADF with break years, Bayer-Hanck for long-term equillibrium, and simple least squares with the break years as primary and final methods. The Granger causality approach is utilized for robustness check, fully modified OLS, and a causal relationship. The results unearth that variables have been found static at the first difference. Moreover, outcomes reveal that oil rent is a curse for Saudi Arabia's financial development. When decreased, corruption's moderating role can transform curse of oil resources into blessings, while geo-political risks have remained insignificant. Moreover, the impact of energy efficiency has adverse and significant. Despite the structural breaks applied, GDP is provided to enhance financial development in Saudi Arabia. The robustness check analysis provides similar and reliable estimates.