The Relationship between Mining, Financial Development and Growth. A Case of BRICS
Keywords:
Mining Sector; Financial Development; Growth; BRICS; Panel DataAbstract
The study investigated the impact of the complementarity between mining and financial development on economic growth in BRICS (Brazil, Russia, India, China, South Africa) using the dynamic generalized methods of moments (GMM) approach with panel data ranging from 1995 to 2018. Extensive empirical research on the role of either (1) mining on economic growth or (2) financial development on economic growth have been done and it appears that their positive influence on economic growth is no longer debatable and is now a conclusive matter. What is still inconclusive is the non-linear influence (revealed by Arezki and Gylfason. 2011) of either mining or financial development on economic growth. In other words, previous research wrongly assumed that mining has a direct linear influence on economic growth, a view which this study disagrees with. The non-linearity between mining and economic growth is the basis upon which this study is hinged on. Both mining and financial development were individually found to have had a significant positive impact on economic growth in BRICS. However, the study also observed that economic growth of BRICS was enhanced by the complementarity between mining and financial development, consistent with an argument put forward by Bakwena and Bodman (2010). BRICS countries are therefore urged to concurrently develop and implement policies targeted at improving mining sector operations and financial development in order to enhance economic growth. Future studies can investigate the various channels that enhances the mining sector’s influence on economic growth in BRICS.
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39. Osinubi, T.S. (1998). Stock Market Development and Long-run Growth in Nigeria. M.Sc. Economics Dissertation, University of Ibadan Nigeria.
40. Pagano, M. (1993). Financial markets and growth: An overview. European Economic Review, 37 (2-3), 613-622.
41. Prebisch, R. (1950). The economic development of Latin America and its principal problems, Economic Bulletin for Latin America, 7 (1), 1-22.
42. Rahman, M.M. Rana, R.H. and Barua, S. (2019). The drivers of economic growth in South Asia: Evidence from a dynamic system GMM approach, Journal of Economic Studies, 46 (3), 564-577.
43. Romer, P. (1986). Increasing returns and long run economic growth. Journal of Political Economy, 94(5), 1002-1037
44. Sachs, J.D. and Warner, A.M. (1995). Natural resource abundance and economic growth, National Bureau of Economic Research. Research Working Paper No. 5398.
45. Schumpeter, J.A. (1911). The Theory of Economic Development. Harvard University Press, Cambridge, MA.
46. Shaw, E.S. (1973). Financial Deepening in Economic Development, Oxford University Press, New York, NY.
47. Singer, H. (1950). Comments to the terms of trade and economic development, Review of Economics and Statistics, 40 (1), 84-89.
48. Stead, R. (1996). Foundation quantitative methods for business. Prentice Hall. England.
49. Tilton, J. (2012). The terms of trade debate and the policy implications for primary product producers. Division of Economics and Business Working Paper Series. Working Paper No. 2012-11, 1-16.
50. Townsend, M.R. (1983). Financial structure and economic activity. American Economic Review, 73 (5), 895-911.
51. Van der Ploeg, F. (2011). Natural resources: curse or blessing, Journal of Economic Literature, 49(2), 366-420.
2. Arezki, R. and Gylfason, T. (2011). Commodity price volatility, democracy and economic growth, CESifo Working Paper Number. 3619, 1-20.
3. Arezki, R. Hadri, K. Loungani, P. and Rao, Y. (2013). Testing the Prebisch-Singer hypothesis since 1650: Evidence from panel techniques that allow for multiple breaks. International Monetary Fund Paper Working Paper. Working Paper No. 13/180, 1-37.
4. Aye, G.C. and Edoja, P.E. (2017). Effect of economic growth on C02 emission in developing countries: Evidence from a dynamic panel threshold model. Cogent Economics and Finance, 5 (1), 1-22.
5. Baltagi, B.H. Demitriades, P.O. and Law, S.H. (2009). Financial development, openness and institutions: Evidence from panel data. Journal of Development Economics, 89 (2), 285-296.
6. Bakwena, M. and Bodman. P. (2010). The Role of Financial Development in Natural Resource Abundant Economies: Does the Nature of the Resource Matter? Botswana Journal of Economics, 7 (11), 16-31
7. Bhagwati, J. (1958). Immiserizing growth: A geometrical note, Review of Economic Studies, 25(3), 201-205.
8. Browne, F. and Cronin, D. (2010), ‘Commodity prices, money and inflation’, Journal of Economics and Business, 62(4), 331-345.
9. Camacho, M. and Perez-Quiros, G. (2014). Commodity prices and the business cycle in Latin America: Living and dying by commodities?, Emerging Markets Finance and Trade, 50(2), 110-137.
10. Cavalcanti, T.V.D.V. Mohaddes, K. and Raissi, M. (2011). Growth, development and natural resources: New evidence using a heterogeneous panel analysis, Quarterly Review of Economics and Finance, 51(4), 305-318.
11. Cavalcanti, T.V.D.V. Mohaddes, K. and Raissi, M. (2015). Commodity price volatility and the sources of growth, Journal of Applied Econometrics, 30(6), 857-873.
12. Collier, P. and Goderis, B. (2012). Commodity prices and growth: An empirical investigation, European Economic Review, 56(6), 1241-1260.
13. Dehn, J. (2000). Commodity price uncertainty and shocks: Implications for economic growth, Centre for the study of African Economies, Department of Economics of Economics University of Oxford, WPS/2000-10.
14. Diamond, D.W. and Dybvig, P.H. (1983). Bank runs, deposit insurance and liquidity. The Journal of Political Economy, 91 (3), 401-419.
15. Dick, H. Gupta, S. Mayer, T. and Vincent, D. (1983). The short run impact of fluctuating primary commodity prices on three developing economies: Colombia, Ivory Coast and Kenya, World Development, 11(5), 405-416.
16. Doroodian, K. and Boyd, R. (2003). The linkage between oil prices shocks and economic growth with inflation in the presence of technological advances: A CGE model, Energy Policy, 31(10), 989-1006.
17. Emara, N. Simutowe, A. and Jamison, T. (2015). Commodity price changes and economic growth in developing countries, Journal of Business and Economics, 4 (10), 1707-1712.
18. Esfahani, H.S. Mohaddes, K. and Pesaran, M.H. (2014). An empirical growth model for major oil exporters, Journal of Applied Econometrics, 29(1), 1-21.
19. Goldsmith, R.W. (1969). Financial structure and development, Yale University Press, New Haven, CT.
20. Guisan, M.C. (2014). World Development, 2000-2010: Production, Investment and Savings In 21 Areas of America, Africa, Asia-Pacific, Europe and Eurasia, Regional and Sectoral Economic Studies, 14 (2), 193-211.
21. Gylfason, T. (2001). Natural resources, education and economic development, European Economic Review, 45(4-6), 847-859.
22. Gylfason, T. and Zoega, G. (2006). Natural resources and economic growth: the role of investment, World Economy, 29(8), 1091-1115.
23. Harvey, D.I. Kellard, N.M. Madsen, J.B. and Wohar, M.E. (2010). The Prebisch-Singer hypothesis: Four centuries of evidence, Review of Economics and Statistics, 92(2), 367-377.
24. Harvey, D.I. Kellard, N.M. Madsen, J.B. and Wohar, M.E. (2017). Long run commodity prices, economic growth and interest rates: 17th century to the present day, World Development, 89(January), 57-70.
25. Hua, P. (1998). On primary commodity prices: The impact of macroeconomic/Monetary shocks, Journal of Policy Modeling, 20(6), 767-790.
26. Im, K.S. Pesaran, M.H. and Shin, Y. (2003). Testing unit roots in heterogeneous panels. Journal of Econometrics, 115 (1), 53-74.
27. Kalumbu, S. (2014). Terms of trade and economic growth in Namibia, An Online International Research Journal, 1(3), 90-101.
28. Kaodor, N. (1987). The role of commodity prices in economic recovery, World Development, 15(5), 551-558.
29. Kao, C. (1999). Spurious regression and residual-based tests for co-integration in panel data. Journal of Econometrics, 90 (1999), 247-259.
30. Levine, R. (1997). Financial development and economic growth: Views and agenda. Journal of Economic Literature, 35 (2), 688-726.
31. Levin, A. Lin, C.F. and Chu, C.S.J. (2002). Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, 108, (1), 1-24.
32. Mallik, G. and Chowdhury, A. (2001). Inflation and economic growth: Evidence from four South Asian countries. Asia-Pacific Development Journal, 8 (1), 123-135.
33. McKinnon, R.I. (1973). Money and Capital in Economic Development, The Brooklings Institution, Washington, DC.
34. Medina, L. (2010). The dynamic effects of commodity prices on fiscal performance in Latin America, IMF Working Paper Number WP/10/192.
35. Nazlioglu, S. and Soytas, U. (2012). Oil price, agricultural commodity prices and the dollar: A panel co-integration and causality analysis, Energy Economics, 34(4), 1098-1104.
36. Odhiambo, N.M. (2014). Financial systems and economic growth in South Africa: A dynamic complementary test, International Review of Applied Economics, 28(1), 83-101.
37. Okoroafor, M.O. and Chinweoke, N. (2013). Poverty and economic growth in Nigeria 1990-2011. The Macrotheme Review, 2 (6), 105-115.
38. Olakojo, S.A. (2015). Export commodity prices and long run growth of primary commodities based African economies, Centre for the Study of the Economies of Africa, Working Paper WPS/15/02, 1-23.
39. Osinubi, T.S. (1998). Stock Market Development and Long-run Growth in Nigeria. M.Sc. Economics Dissertation, University of Ibadan Nigeria.
40. Pagano, M. (1993). Financial markets and growth: An overview. European Economic Review, 37 (2-3), 613-622.
41. Prebisch, R. (1950). The economic development of Latin America and its principal problems, Economic Bulletin for Latin America, 7 (1), 1-22.
42. Rahman, M.M. Rana, R.H. and Barua, S. (2019). The drivers of economic growth in South Asia: Evidence from a dynamic system GMM approach, Journal of Economic Studies, 46 (3), 564-577.
43. Romer, P. (1986). Increasing returns and long run economic growth. Journal of Political Economy, 94(5), 1002-1037
44. Sachs, J.D. and Warner, A.M. (1995). Natural resource abundance and economic growth, National Bureau of Economic Research. Research Working Paper No. 5398.
45. Schumpeter, J.A. (1911). The Theory of Economic Development. Harvard University Press, Cambridge, MA.
46. Shaw, E.S. (1973). Financial Deepening in Economic Development, Oxford University Press, New York, NY.
47. Singer, H. (1950). Comments to the terms of trade and economic development, Review of Economics and Statistics, 40 (1), 84-89.
48. Stead, R. (1996). Foundation quantitative methods for business. Prentice Hall. England.
49. Tilton, J. (2012). The terms of trade debate and the policy implications for primary product producers. Division of Economics and Business Working Paper Series. Working Paper No. 2012-11, 1-16.
50. Townsend, M.R. (1983). Financial structure and economic activity. American Economic Review, 73 (5), 895-911.
51. Van der Ploeg, F. (2011). Natural resources: curse or blessing, Journal of Economic Literature, 49(2), 366-420.
Published
2021-02-10
How to Cite
Tsaurai, K. (2021). The Relationship between Mining, Financial Development and Growth. A Case of BRICS: Array. Acta Universitatis Danubius. Œconomica, 17(2). Retrieved from https://dj.univ-danubius.ro/index.php/AUDOE/article/view/675
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Business Administration and Business Economics
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