The effect of globalisation, foreign direct investment, and natural resource rent on economic recovery: Evidence from G7 economies

ABSTRACT

Economic and natural resources are key indicators that significantly contribute to reducing environmental degradation and promoting economic progress in the present age of globalisation. Therefore, this study analyses the relationship between globalisation, foreign direct investment, and natural resource rent on economic recovery for the G7 nations between 2000 and 2020. We have the applied GMM model to analyse linkages among the variables. According to the empirical results of our model, higher natural resource rent impedes the economic development of G7 countries. Foreign direct investment, financial development, technological innovation, and involvement in trade openness are combined to produce economic growth. Another intriguing conclusion from this study is the synergistic effect of natural resources and foreign direct investment on economic development. Therefore, it can be claimed that in the case of the G7 nations, human capital development helps offset the effects of the resource curse. In contrast, economic globalisation impedes the growth of the financial sector. The empirical data offers policymakers a fresh perspective on exploiting natural resources as a tool for long-term financial growth.