Striking the balance in resource management: Exploring the impact of natural and mineral resources on financial development in BRICS-T nations

The BRICS-T nations-Brazil, Russia, India, China, South Africa, and Turkey-feature diverse economic structures, including strong manufacturing sectors, advanced technological capabilities, and rich natural and mineral resources, all of which offer substantial potential for economic growth. However, the role of these resources in fostering financial development has been underexplored. This study investigates the impact of natural (oil and coal) and mineral resource rents on financial development in BRICS-T countries, while controlling for political stability and economic growth, to discern whether these resources contribute to a resource blessing or a resource curse. Utilizing a 34-year dataset (1990-2023) and robust panel estimation techniques, including the Cross-Sectionally Augmented Autoregressive Distributed Lag (CS-ARDL) model alongside rigorous robustness tests, the analysis reveals a resource curse for natural resources (oil and coal), which hinders financial development due to economic volatility and sector imbalances. In contrast, mineral resources exhibit a resource blessing, significantly enhancing financial development by supporting financial sector growth and diversification. Furthermore, economic growth and political stability are pivotal in promoting financial development, with their long-run effects being more pronounced than in the short run. These findings suggest that policymakers in BRICS-T nations should focus on the strategic management of mineral resources rather than relying heavily on natural resources to promote financial development. Additionally, fostering stable political environments and sustained economic growth is essential to enhancing the resilience and strength of the financial sector.