Economic performance, investment in energy resources, foreign trade, and natural resources volatility nexus: Evidence from China's provincial data

The recent trend in economic research regarding volatility in natural resources is a burning issue, attracting the policy level attention as China is among the first economies to face this issue in severe during the Covid-19 period. In response, the current study analyzed 30 Chinese provinces from 1995 to 2017. Specifically, this study focuses on examining the nexus of natural resources volatility (TNRT), economic performance (GDP), investment in energy resources (IER), foreign trade (FT), and technology innovation (TI). Since the variables follow irregular distribution, this study uses the novel movement quantile regression approach method, which efficiently deals with data's abnormality and provides estimates at a specific location, scale, and quantile and is more robust than the traditional approaches. This study restricts the influence of explanatory variables up to four quantiles, i.e., Q(0.25), Q(0.50), Q(0.75), and Q(0.90). Empirical findings reveal that GDP, FT, and TI positively influence TNRT, indicating that these variables are favorable factors of natural resource volatility. Still, the influence and magnitude of GDP and FT are reducing from lower to higher quantile. In contrast, IER influences TNRT, reducing magnitude from lower to higher quantile and becoming insignificant in Q(0.90). This indicates that investment in IER could reduce natural resource volatility. Moreover, unidirectional causality is reported running from FT to TNRT. At the same time, the feedback effect is validated for the rest of the explanatory variables and TNRT. Since this study focuses on provincial data, the results could be generalized to provincial authorities rather than the central authorities and could help construct relevant policies to resolve the issue. This study recommends rapid economic growth, enhancement of investment in energy resources, and adoption of innovative technology to reduce volatility in natural resources.