Making Abundant Natural Resources Work for Developing Economies

Table 8: Fully modified OLS estimates (dependent variable is bank credit)Specification Output Investment ResourceTime effects 0.01( 1.06 ) 0.02( 0.46 ) -0.04( -4.64 )*No time effects 0.05( 15.76 )* 0.16( -0.87 ) -0.11( -8.71)*The figures in parentheses are the t-statisticsFinancial indicator used here is bank credit* denotes statistical significance at the 1% level of significanceThe results presented in tables 2 to 8 imply that the type of financial indicator used foranalysis matters in terms of which of Patrick(1966)’s view on the relationshipbetween financial development and economic growth holds.To answer the question of the channels via which financial development may negatethe detrimental effects of natural resource on economic growth, investment isregressed on the three other variables. 15Table 9: Panel cointegration results (dependent variable is investment)No time effectsTime effectspanel v-stat 0.89679 -0.28545panel rho-stat 0.06178 0.46511panel pp-stat -5.43401* -4.77890*panel adf-stat -4.79882* -5.41380*group rho-stat 1.20344 1.65297***group pp-stat -5.74936* -4.88575*group adf-stat -4.90881* -4.45301*The figures in parentheses are the t-statisticsFinancial indicator used here is domestic credit to the private sector* rejects the null hypothesis of no cointegration at the 1% level of significance** rejects the null hypothesis of no cointegration at the 5% level of significance*** rejects the null hypothesis of no cointegration at the 10% level of significance15 Since our chosen financial indicator is domestic credit to the private sector, this exercise is only donefor this estimator.