Making Abundant Natural Resources Work for Developing Economies

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FINDEXGROWTHFinancialdevelopment indexGDP per capitagrowth(annual %)Composite financial development index Ndikumana (2000)Annual percentage growth rate of GDP per capita based onconstant local currency. GDP per capita is gross domesticproduct divided by midyear population. GDP at purchaser'sprices is the sum of gross value added by all resident producersin the economy plus any product taxes and minus anysubsidies not included in the value of the products. It iscalculated without making deductions for depreciation offabricated assets or for depletion and degradation of naturalresources.Demirguc-KuntLevine(1996)WDI databaseandOUTPUTGDP per capita(constant 2000US$)Gross domestic product divided by midyear population. GDPis the sum of gross value added by all resident producers in theeconomy plus any product taxes and minus any subsidies notincluded in the value of the products. It is calculated withoutmaking deductions for depreciation of fabricated assets or fordepletion and degradation of natural resources. Data are inconstant U.S. dollars.WDI databaseINVESTMENTInvestment share ofreal GDP per capita(Laspeyres)(RGDPL)RGDPL is obtained by summing investment, consumption,government and exports, and subtracting imports in any givenyear. The indicator is a fixed base index with 1996 as thereference year, hence the “L” for Laspeyres.Penn World tables36
Alternative causality testsTable A.3 reports the causality results from the panel error correction model based onGMM estimation. The Wald hypothesis test rejected the null hypothesis that thesecond lag is insignificant. Having established that a lag length of two years issufficient, values of the dependent variable with higher lags are used as instruments. 19The instruments used are valid if there is no correlation between the error terms andthe instruments. To ascertain this, the Sargan’s test for over-identification (notreported here) was used. For all the equations, we do not reject the null hypothesisthat the over-identifying restrictions are valid (or population moment conditions arecorrect) and conclude that the population moment conditions are correct.Table A.3: Wald F-test statistic from Panel ECM estimationDependent variable Source of causation (independent variable)Short runLong runΔ Y Δ F Δ N Δ I ECT t-1Δ Y —— 3.13 202.26 84.59 16.28(0.05)** (0.00)* (0.00)* (0.00)*Δ I 13.61(0.00)*0.04(0.84)22.02(0.00)*—— 284.21(0.00)*Notes: Time dummies were included in all estimations. Figures in parenthesis are the p-values. Theother relationships are not reported because they do not add to the discussion. For the case where F wasa dependent variable, the results show no cointegration among the variables and this implies that acausal relationship from output to financial development is unlikely. Finally, we do not expect naturalresource intensity to be caused by any of the variables (i.e. it is exogenously determined.*Statistically significant at the 1% level** Statistically significant at the 5% level19 Second lag was significant for the growth equation but not the investment equation.37
Page 2 and 3: 1. IntroductionThis study is relate
Page 4 and 5: properties of the data. 5 Consequen
Page 7 and 8: where saving had gone up subsequent
Page 9 and 10: Empirical examination of the causal
Page 11 and 12: solving problems of omitted variabl
Page 13 and 14: As mentioned earlier, the Hadri tes
Page 15 and 16: Where ê it is the estimated residu
Page 17 and 18: them in a similar fashion. They gen
Page 19 and 20: of credit to the private sector (F
Page 21 and 22: Financial development index : Follo
Page 23 and 24: The statistics also illustrate a ne
Page 25 and 26: Tables 3 and 4 present panel cointe
Page 27 and 28: is the dependent variable. Thus, it
Page 29 and 30: The results from table 9 show that
Page 31 and 32: Previous FMOLS estimates show a pos
Page 33 and 34: Tsionas, 2004; Darrat, 1999) that t
Page 35: Table A.2 Definition of variablesVa
Page 39 and 40: Chang, T., & Caudill, S. B. (2005).
Page 41 and 42: Levine, R., & Zervos, S. (1998). St

Making Abundant Natural Resources Work for Developing Economies

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