Natural resource abundance, financial development and economic growth: An investigation on Next-11 countries

The financial system needs to develop in order for natural resource exports to have a positive effect on economic growth. Yet, an advanced financial system is crucial for transferring the revenues from oil exports to productive investments. If the level of development of the financial system remains under a certain threshold, the effect of natural resource exports on economic growth is too low. In this vein, the determination of the level and the deepness of financial development that has a positive impact on the growth of natural resource exports should be clarified. The aim of this study is to investigate the relationship between the impact of natural resource exports on economic growth and the level of financial deepening by using the data of the selected Next-11 countries for the period of 1996-2016. Nonlinear panel data methodology is used in the study. Based on the empirical results, for the first regime, where the rate of financial deepening is under 45%, the increase in oil exports does not have a statistically significant effect on ecenomic growth. For the second regime, where financial deepening is over 45%, one unit increase in oil exports causes a 7% increase in economic growth.