Investigating the impact of financial liberalization on mining productivity in Zimbabwe from 1980 to 2021

Abstract

Financial liberalization emphasizes on the leading role of market forces in the financial sector of the economy and it is one of the debatable issues in the world economy. However, it is far from clear how financial liberalization actually affects productivity growth in general. This study aims to investigate the impact of financial liberalization on mining productivity over the period of 1980 to 2021. The ARDL approach to co-integration and error correction model were employed to assess the long run relationships. The empirical results obtained from the study indicate that financial liberalization has contributed significantly to the increase in mining productivity. The variables used are as follows the dependent variable, mineral rent representing the mining productivity and the independent variables interest rate, exchange rate, inflation, foreign direct investment, trade openness and mineral depletion. The empirical findings revealed that interest rate, foreign direct investment and mineral depletion had a positive impact on mining productivity (mineral rent) and was statistically significant. While, exchange rate, inflation and trade openness had a negative impact on mining productivity and was statistically significant. The main policy recommendations were that government needs to continually implement policies that allow investors to enter and exit the mining sector without any barriers since this would attract new participants to the mining industry and foster competition among the major firms. Government support is required for the small-scale sector to increase its capability for mining and quality control.