Analyzing the Impacts of Geopolitical Risk and Economic Uncertainty on Natural Resources Rents

Abstract

The determinants of natural resources rents have been extensively analyzed in the resources economics and policy literature; however, the role of geopolitical risk and uncertainty in rents remains unexplored. Given that these indicators are rather volatile and thus important to discover for developing countries which own a large portion of natural resources in the world, this study aims to examine the effects of geopolitical risk and economic policy uncertainty on natural resources rents in a group of developing economies by applying the novel panel quantile estimation technique on the panel data over 1985-2018. The empirical results suggest that geopolitical risk has a negative impact on the natural resources rents for all quantiles while economic growth increases natural resources rents across middle-and-high quantiles. In contrast, the influence of economic policy uncertainty on resources rents varies across the quantiles. The uncertainty increases natural resources rents in low quantiles and decreases rents in high quantiles. Thus, quantile regression results reveal heterogeneous impacts of the selected main determinants of natural resources rents. Important policy implications are further discussed in the study.