The interplay between technological innovation, financial development, energy consumption and natural resource rents in the BRICS economies: Evidence from GMM panel VAR

Abstract

By employing the GMM panel VAR framework, we examine the interplay among natural resource rents, technological innovation, financial development, and energy consumption in the BRICS from 1990 to 2020 on an annual basis. The findings of the study demonstrate a significant negative association between natural resources and technical innovation, as well as a negative relationship with financial development. While the notion of the natural resource curse is deemed invalid, the present study asserts that natural resources do indeed cause financial development. There is an insignificantly positive relationship between natural resources and energy use. There exists a significant negative association between financial development and technical innovation, while a positive association is shown between financial development and energy use. Primary energy consumption is negative (positive) and statistically significantly associated with natural resources (financial development), although that link is simply negative in the case of technological innovation. Technological innovation is positive and significantly related to variables (natural resources and energy consumption), while the link is insignificantly positive to financial development. The results of the causality test reveal a bidirectional relationship between energy consumption and technological innovation, with all variables showing a significant influence on each parameter. There exists a unidirectional causal relationship wherein natural resources influence financial development, natural resources influence technological innovation, and financial development influences technological innovation. Moreover, there is a unidirectional correlation that may be observed from energy use towards natural resources, financial progress, and technological innovation. The findings from the impulse response function indicate that there is a substantial increase in the proportion of each variable that can be explained by other parameters as we transition from the short-term to the long-term. The implications of the study findings are also presented.