Natural resources to economic prosperity: evaluating the role of institutional quality, financial development, and human capital in the resource-rich economyNatural resources to economic prosperity: evaluating the role of institutional quality, financial development, and human capital in the resource-rich economy

The literature remains inadequate in investigating the nexus between financial development, human capital, and institutional quality, particularly regarding how human capital interacts with natural resources to identify whether natural resources are a curse or a blessing in resource-rich economies. Oman is confronting significant challenges related to its over-reliance on windfall revenues from natural resources. Against this background, this study aims to address the research question regarding how Oman can effectively and efficiently utilise these windfall revenues to achieve sustainable economic growth. This study uncovers the nexus between economic growth, natural resources, institutional quality, human capital and financial institutions in Oman’s resource-rich economy. Furthermore, the interaction effect of human capital and natural resources has been used in the economic demand model using data from 1995Q1 -2018Q4. Employing time series methodology, this study applied the recent Fourier ADF and GLS to identify the integration order. The novel RALS-FARDL and bounds test was used to determine the long-run nexus. The long-run elasticities were identified under the ARDL framework. Finally, the single Fourier frequency causality was applied to determine the causal nexus among the variables. After identifying the unique order of integration at first difference, the long-run nexus has been confirmed. Financial institutions, institutional quality, and natural resources positively and significantly impact economic growth. It has been validated that natural resources are a blessing for Oman’s economy. Further, human capital positively and significantly moderates the nexus between natural resources and economic growth. Finally, a bi-directional causal relationship exists between institutional quality and economic growth. The Omani government should prioritise its investment opportunities and diversify by investing in non-oil sectors, such as manufacturing, logistics, tourism, and fisheries, thus aligning with Oman’s vision 2040. Human capital must be equipped with the necessary technological skills to benefit from technology and recent innovations by providing intensive training.