Fiscal decentralization, political stability and resources curse hypothesis: A case of fiscal decentralized economies

Abstract This study provides new insight into the resources curse hypothesis by introducing fiscal decentralization and political risk index and its impact on financial development. We collected data for thirty-one developed countries from 1984 to 2019. Usage of a multidimensional index for financial development, the empirical findings indicate the resource curse hypothesis's existence. Further, fiscal decentralization, GDP, and political risk index improvement promote the sampled countries' financial development. Moreover, the multiplicative term for fiscal decentralization with natural resources rent rejects the resource curse hypothesis. Based on the empirical findings from quantile regression, this study suggests promoting fiscal decentralization and further improving the political risk index scoring to achieve a high financial development level in these countries and avoid the resource curse hypothesis.