Factors affecting economic growth: empirical evidence from developing countries

2.3.
 
Natural Resources 
The abundance of natural resources has been theoretically associated with increased economic 
development as they lead to more exports and generate natural resource rent (Auty 2003). 
However, recent studies indicate that developing nations do not benefit economically from 
their abundant natural capital stock. Barbier (2012) established stagnant growth from low and 
middle-income developing countries with significant natural resources stocks. His panel data 
analysis on 867 low-income countries showed increased agricultural land expansion in a lower 
per capita income level. This result confirmed the inverse relationship between natural 
resources and income per capita growth on mineral-driven economies study by Wright and 
Czelusta (2011). They concluded that the abundance of natural resources was more of a curse 
than a blessing to a developing country.
2.4.
 
Inflation 
The subject of inflation and economic growth in developing countries has been of interest to 
many policymakers and researchers. Some economists argue that some inflation is necessary 
for economic growth, while others consider it detrimental (Omotunde 1984). Andrés and 
Hernando (2014) established a significantly negative relationship between economic growth 

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and inflation in OECD countries. Their research showed that inflation negatively affected the 
propensity to invest and reduced the efficiency of inputs used in production. On the other hand, 
Ndoricimpa (2017) estimated an inflation threshold of 9% for low-income countries and 6.5% 
for middle-income countries to positively impact growth. Above the threshold, it was 
considered detrimental to these countries' economic development.
Given the various studies on factors influencing economic growth in developing countries, it 
is worthwhile to estimate the factors currently affecting developing nations for better policy 
development.