Testing natural resource curse hypothesis amidst geopolitical risk: Global evidence using novel Fourier augmented ARDL approach

Abstract

Amid global and geopolitical conflicts and other related scenarios, the role of natural resources abundance on present and future economic growth and development remains a question of importance. A plethora of literature has already explored the validity of the natural resource curse hypothesis, however, the analysis at the global level remains disregarded. On top of this, the role of geopolitical risk in the natural resource curse framework is also ignored in the prior literature. Hence, this study attempts to test the resource curse hypothesis amidst geopolitical risk by using global data. We adopt the novel Fourier augmented autoregressive distributed lag (ARDL) approach for robust empirical analysis. The findings claim that natural resources promote economic growth, thus, invalidating the resource curse hypothesis. However, the interaction of natural resources and geopolitical risk hinders economic growth, thus validating the natural resource curse hypothesis as induced by geopolitical conflicts. Moreover, the findings show that capital stock and technological innovation promote global economic output. These findings suggest that proactive measures that potentially minimize geopolitical risk are vital for the prevention of the natural resource curse.