Quantifying the Impact of Natural Resources on Sustainable Growth in Developing Economies: Evidence from Panel Nonlinear ARDL Technique

Abstract

The main purpose of current research is to analyze the impact of natural resource exploration on sustainable growth in developing economies. Annual panel data of 57 developing countries from 2000 to 2021 has been used for research analysis. First, this study uses a simple Panel Autoregressive Distributive Lag (ARDL) estimation technique to examine the long-run and short-run link among the variables. The results depict that in the long run natural resource exploration has a significant negative impact on sustainable growth. This finding supports the presence of the resource curse hypothesis. Besides this, the present study decomposes the policy variable (mining contribution index) into its two shocks i.e. positive shock and negative shock by applying a panel non-linear ARDL approach. The long-run outcomes depict that both the coefficients of partial positive and partial negative sums of natural resource rents are negative and significant. Furthermore, the research outcomes explain that financial openness and international trade have a substantial and positive impact on sustainable progress. The policy implications for current research are to avoid bad rent-seeking behaviors and to escape from non-productive activities to achieve sustainable development. Furthermore, there is a dire need to adopt and support environmentally friendly policies.