Modeling Sustainable Natural Resource Consumption and Its Impact on Economic Growth: An Empirical Study of Africa and Asia

ABSTRACT The utilization of natural resources plays a crucial role in economic development and enhancing social welfare. This study aims to empirically explore the effect of natural resource rents on economic growth to test whether natural resources are a curse or a blessing for 12 developing Asian and 12 African countries using 27–year data. After conducting all relevant diagnostic tests on the data, the pooled mean group technique is employed to assess the long‐term relationship among the series. Additionally, the Fully Modified OLS and Dynamic OLS methods are implemented for robustness checks. The empirical results show that natural resource rent has a significant positive impact on economic growth in Asian countries, supporting the natural resource blessing hypothesis. While its relationship has a significant negative effect on economic growth in African countries, supporting the resource curse hypothesis. Furthermore, the results show that institutional quality and its interaction with natural resources significantly uplift economic growth in the short and long run. Empirical results also reveal that a developed financial sector and institutional quality factors play a vital role in the utilization of available natural resources in achieving the desirable level of economic growth and development in both regions. The other control variables found have expected signs and also support earlier studies' findings. Thus, appropriate public policies are needed where the focus is to be given to ensure good governance and financial sector development to maximize the benefits of natural resource endowments and improve societal well‐being in developing Asian and African countries in alignment with the UN Sustainable Development Goals.