Volatility in natural resources prices and economic performance: Evidence from BRICS economies

Natural resources and economic growth nexus have been extensively investigated since the last three decades and still the debate is in progress. However, in the current times, natural resources prices volatility got importance as natural resources prices are playing crucial role in economic growth by regulating economic activities, which is relatively less studied. Natural resources price volatility and economic performance nexus have set new trends for scholars and policy-makers. Volatility in natural resources could have a detrimental impact on the economic performance of a country or region. In this regard, the current study aims to identify the relationship between them while considering the role of green innovation in the BRICS economies between 1990 and 2021. Employing the cross-sectionally augmented autoregressive distributive lags (CS-ARDL) approach, the results revealed that natural resource volatility, oil rents, natural gas rents, and green innovation positively influence the economic performance in both short-run and long-run. These results are found robust as verified by the long-run estimator augmented mean group (AMG). Besides, the Dumitrescu and Hurlin (2012) Granger panel causality heterogeneous test unveil a bidirectional causal association between the under discussion variables and economic performance. Based on the empirical findings, this study recommends that natural resources hedging, price freezing or ceiling, and promoting green innovation could be remedial measures to improve economic performance further and reduce natural resources price volatility in the region.

Automated summary

The study explores the relationship between natural resource price volatility and economic performance in the BRICS economies, finding that natural resource volatility, oil rents, natural gas rents, and green innovation positively influence economic performance in both short-run and long-run. Additionally, a bidirectional causal association is identified between the variables under discussion and economic performance. Recommendations include natural resources hedging, price freezing or ceiling, and promoting green innovation to improve economic performance and reduce natural resources price volatility.