Financial development, oil resources, and environmental degradation in pandemic recession: to go down in flames

The novel coronavirus disease-2019 (COVID-19) is a deadly disease that increases global healthcare sufferings. Further, it affects the financial and natural resource market simultaneously, as both are considered complementary goods. The volatility in the oil prices deteriorates the global financial market to substantiate the “financial resource (oil) curse” hypothesis primarily filled with earlier studies. In contrast, this study moved forward and extended the given relationship during the COVID-19 pandemic in a panel of 81 different countries. The study’s main objective is to examine the volatility in the domestic credit provided to the private sector due to oil shocks and the COVID-19 pandemic across countries. The study is essential to assess the healthcare vulnerability in the COVID-19 pandemic, leading to the damage of financial stability, causing deterioration in the oil rents to affect the global sustainability agenda. The study employed statistical techniques to get sound inferences of the parameter estimates, including robust least squares regression, seemingly unrelated regression, and innovation accounting matrix to get a variable estimate at the level and inter-temporal framework. The results confirmed the U-shaped relationship between oil rents and financial development during the COVID-19 pandemic. Thus, it verifies the “financial resource (oil) curse” hypothesis at the initial stage of the COVID-19 pandemic. Later down, it supports the capital market when economies are resuming their economic activities and maintaining the SOPs to restrain coronavirus at a global scale. The qualitative assessment confirmed the negative effect of financial development and oil shocks on environmental quality during the pandemic crisis. The innovation accounting matrix shows that the COVID-19 pandemic will primarily be the main factor that intervenes in the relationship between oil rents and financial development, which proceed towards the “resource curse” hypothesis during the following years’ time period. Therefore, the need for long-term economic policies is highly desirable to support the financial and resource market under the suggested guidelines of restraining coronavirus worldwide.