Artificial intelligence and finance–resource nexus: evidence from Middle and Non-Middle Eastern countries

Abstract

Purpose This study aims to investigate the nexus between natural resource rent and financial development, considering artificial intelligence (AI) as a moderator across 36 countries for the period from 2017 to 2023. Furthermore, this study categorises 36 countries into Middle Eastern and non-Middle Eastern countries based on their significant reliance on natural resources. This classification enables an examination of the variations in the relationship between natural resource rent and financial development. Design/methodology/approach This study applies both static and dynamic panel data models. Specifically, pooled ordinary least squares with cross-sectional weights, random-effects models, feasible generalised least squares and system generalised method of moments panel data models are used to achieve robust results. Findings The findings from both static and dynamic panel data models indicate that natural resource rents inhibit financial development, supporting the natural resource curse hypothesis in the financial sector. Moreover, AI has a positive impact on financial development and reverses the negative impact of natural resource rent. Similar results are obtained for non-Middle Eastern countries. However, AI fails to offset the negative impact of natural resource rent on financial development in the case of Middle Eastern countries. Practical implications The findings imply that reliance solely on natural resource rents is inadequate for fostering financial development. It is suggested that policymakers, especially in resource-rich countries, avoid overreliance on resource rents and instead prioritise the integration of AI into their financial systems. Originality/value In the era of digital transformation, AI has emerged as a key driver of countries’ financial development by improving the use of natural resources. Amidst the rapid digital transformation, the extent to which AI alters the finance–resource nexus remains unclear. While natural resources significantly influence financial development in resource-rich Middle Eastern economies, studies often overlook the moderating role of AI. Furthermore, there is limited understanding regarding whether this moderating effect varies between Middle Eastern and non-Middle Eastern countries. Hence, this study fills this research gap.