The impact of globalization, natural resources abundance, and human capital on financial development: Evidence from thirty-one OECD countries

Financial development is considered the backbone of a country's economic development. It usually acts as a moderator of the effects of economic variables and impacts economic development accordingly. This study examines the impact of globalization, natural resources, and human capital on financial development by controlling the effect of economic growth and capital in the Organization of Economic Cooperation and Development (OECD) countries. The study covers data from 1990 to 2016 and employs a set of second-generation econometric techniques to control the issues of cross-sectional dependence and heterogeneity in the panel data. The cointegration method's results indicate a long-run relationship between the study's variables. The empirical results of Continuously Updated Fully Modified (Cup-FM) ordinary least squares method suggest a positive and significant impact of globalization, natural resources, and human capital on financial development. Economic growth and gross fixed capital formation also positively impact financial development. The results of a Dumitrescu and Hurlin causality analysis confirm the feedback effects of globalization, economic growth, and gross fixed capital formation on the dependent variable i.e, financial development. Natural resources (Granger-) cause financial development in a positive way, and financial development (Granger-) causes human capital. Policies to avoid protectionism against globalization and human capital movement, development of more financial institutions through a globalized culture, and effective use of natural resources are recommended.