The Relationship between Mining, Financial Development and Growth. A Case of BRICS

Abstract

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.

Keywords

• mining sector
• financial development
• growth
• brics
• panel data