Abstract:

Financial development is of vital importance for a country's economic development and sustainable growth. The literature focusing on the determinants of financial sector development is diverse but controversial. This study aims to empirically investigate the long-term relationship between natural resources, economic growth, savings, current account balance, and financial sector development for BRICS countries. The Fully Modified OLS (FMOLS) and Dynamic OLS (DOLS) methodologies were used to estimate long- and short-term relationships in the study. Analyses were conducted using data from the period 2001-2020. Empirical findings indicate that the variables are cointegrated. According to the estimation results of FMOLS models' long-term coefficients, there is a statistically significant negative relationship between per capita economic growth, total natural resource rent, current account balance, and financial development, and a statistically significant positive relationship between gross savings and financial development. According to the DOLS results, there is a statistically significant negative relationship between per capita economic growth and total natural resource rent with financial development, and a statistically significant positive relationship between gross savings and financial development. The results are discussed within the context of the financial sustainability perspective for BRICS countries and policy implications are presented.

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