Validating resources curse hypothesis in US: Exploring the relevancy of financial market risk and technology innovation

Abstract

Countries that have a higher reserve of resources tend to have less developed financial systems. The financial sector plays a vital role in facilitating the conversion of personal savings into business investment and the efficient allocation of limited resources, both of which contribute to economic expansion. Moreover, due to its size, and location, the United States of America possesses a variety of natural resources, including water, oil, gas, coal, farmland, land, coastlines, etc. However, theoretical forecasts for financial growth are conflicting for natural resource-rich countries. Hence this research is conducted to identify the role of Natural Resources (NTR), Technology Innovation (TIN), and Financial Market Risk (FMR) in light of the natural resource curse hypothesis for the USA. Through the application of Bootstrapped ARDL, the findings validate the existence of the resource curse, where TIN is also found to enhance the FD; however, the role of FMR is found to enhance the FD, which might be because of the geographical context of the US where people are assumed to be not risk averse and keep on their investing despite of prevailing market uncertainties. Besides, the identification of the nexus between the aforementioned variables in the presence of the resource curse hypothesis would help corporations and policymakers in developing strategies that can promote sustainable financial development.