Akademik Veri Yönetim Sistemi
Manas Journal of Social Studies, cilt.15, sa.1, ss.58-74, 2026 (TRDizin)
This study investigates the impact of political stability and the natural resource curse on financial development in the ten European economies with the highest fiscal decentralization rates from 2002 to 2020. To analyze the short and long-term relationships, panel data methods were used. Panel VAR and VECM models were applied for panel causality analyses, and AMG and CCE estimators were used for cointegration. In the short run, only natural resource revenues significantly affect financial development. However, in the long run, a collective causality from per capita income, political stability, fiscal decentralization, and natural resource revenues to financial development is observed. Parameter estimates reveal that fiscal decentralization and political stability significantly influence financial development, though the effect varies across countries. In Austria and Latvia, fiscal decentralization appears to mitigate the natural resource curse’s effects, whereas in other countries, the negative impacts of institutional weakness and natural resource revenue volatility are evident. The study demonstrates a long-run interaction between fiscal decentralization, natural resource revenues, political stability, and financial development, with governance structure as the primary mediating variable. Empirical findings suggest that policies aimed at mitigating the negative effects of the natural resource curse should focus on strengthening institutional reforms alongside fiscal decentralization.