Institutional quality and financial development: The United States perspective

This paper revisits the ambiguous natural resource rent and finance nexus in the context of the United States, incorporating the vital role of institutional quality in this paradigm. The literature on the subject matter lacks consensus and overlooks the institutional framework. The study utilizes a...

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Bibliographic Details
Published inJournal of multinational financial management Vol. 49; pp. 67 - 80
Main Authors Khan, Muhammad Asif, Khan, Muhammad Atif, Abdulahi, Mohamued Elyas, Liaqat, Idrees, Shah, Sayyed Sadaqat Hussain
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.03.2019
Subjects
Financial development
G18
G28
G34
Institutional quality
Natural resource rent
O13
P28
P48
O13
P48
P28
Financial development
Institutional quality
Natural resource rent
G34
G28
G18
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Summary:This paper revisits the ambiguous natural resource rent and finance nexus in the context of the United States, incorporating the vital role of institutional quality in this paradigm. The literature on the subject matter lacks consensus and overlooks the institutional framework. The study utilizes a unique data set by the International Monetary Fund (IMF), considered the most comprehensive measure of financial development. Our findings based on a robust cointegration approach conclusively confirm that institutional quality is a significant prerequisite to financial development in the United States. The natural resource rent affects financial development negatively when we include proper controls in the estimation. However, we find that institutional quality moderates the natural resource rent and finance nexus. We recommend that policymakers and researchers consider the importance of institutions to come up with realistic estimations and policy inputs.
ISSN:1042-444X
1873-1309
DOI:10.1016/j.mulfin.2019.01.001