Trade-offs and synergies: Examining the impact of natural resource rents and energy efficiency on financial development in the RCEP context

This study investigates the complex interplay between financial and economic development within the Regional Comprehensive Economic Partnership (RCEP) countries-Australia, China, Indonesia, Japan, and South Korea-from 2000 to 2022, with a focus on the impacts of natural resource rents and energy efficiency. Employing moment quantile regression to address non-normal data distribution identified by the Jarque-Bera (JB) test, we unveil diverse slopes and cross-sectional interdependencies, necessitating a nuanced examination. Panel unit root tests confirm non-stationarity, enabling a thorough investigation. Our findings reveal a long-term cointegration relationship between natural resource rents, energy efficiency, economic development, and foreign direct investment (FDI), providing a holistic understanding of their dynamics. Notably, our analysis exposes the trade-off between natural resource abundance and financial growth, as evidenced by negative coefficients for natural resource rents, while positive coefficients for economic growth, energy efficiency, and FDI counterbalance this effect, fostering a conducive financial environment. Additionally, our examination of location and scale characteristics unveils vulnerabilities associated with natural resources alongside stability indicators linked to economic growth, energy efficiency, and FDI. By employing quantile regression, our study sheds light on the nuanced impacts of natural resources, offering valuable insights for policymakers and researchers in navigating sustainable financial development within the RCEP framework.