Testing the resource curse hypothesis: The dynamic roles of institutional quality, inflation and growth for Dragon

Abstract

In the recent time period, we have observed a great deal of interest from different stakeholders to discuss regarding the credibility of the resource curse/blessing assumption for so many obvious reasons, including that economies and policy practitioners are eager to reap the benefits of natural resources to increase economic prosperity. On the same lines, this analysis confabulate the credibility of resource curse assumption in presence of two most prominent economic indicators, institutional quality and inflation, which are essentially interconnected with financial development in developing nations. Our present analysis is grounded upon a developing economy - China - and will serve as a stepping stone for the similar economies. The time period we have considered for empirical estimation is from 1990 to 2020. The empirical analysis, after estimations elucidates that in the far off time frame, natural resources are adversely interconnected with financial growth, i.e., resource course hypothesis is proved. However, quality of government is favorably associated with financial development and inflation is hampering the financial development. Thus, policymakers should adapt those polices which discourage the over utilization and exploitation of natural resources and also to encourage the political reliability and fiscal decentralization in the Chinese economy also bring a positive increase in financial development.