In this study, we investigate the relationship between financial development and natural resources rents, examining the hypothesis of the “Financial Resource Curse”. This examination is conducted separately within the domains of the banking system, the stock market, and the whole financial system in Iraq. The study covers the period from 1990 to 2021 and utilizes annual data sourced from the World Bank. Our analysis employs ARDL and NARDL models to estimate the relationships between these variables. Additionally, DOLS estimator is employed to ensure the robustness of our results. Our findings reveal a notable, negative, and statistically significant effect of resources rents on the development of Iraq's banking sector and the whole of financial system. This outcome lends support to the hypothesis of the financial resource curse within these sectors in Iraq during the examined period. However, the relationship between resources rents and the stock market development index does not yield statistically significant results, making it difficult to make conclusions regarding the existence of the financial resource curse in the stock market. Furthermore, the enhancement of institutional quality has had a positive and statistically significant impact on financial development within both the banking and stock market sectors of Iraq during the period under review. The Corruption Index also demonstrates a positive and statistically significant effect on the development of the banking sector, supporting the hypothesis of "grease in the wheels of the machine." However, it exerts a negative impact on the development of the stock market and the financial system.
