Commodity Price Volatility and the Sources of Growth
By Tiago Cavalcanti, Kamiar Mohaddes, Maizar Raissi. Social Science Research Network, 2012
244 citations recorded by the source corpus.
This paper studies the impact of the level and volatility of commodity terms of trade on economic growth, as well as on the three main growth channels: total factor productivity, physical capital accumulation, and human capital acquisition. We argue that volatility, rather than abundance per se, drives the "resource curse" paradox and also investigate empirically whether export diversification of commodity dependent countries contribute to faster growth. We use the standard system GMM approach as well as an augmented version of the pooled mean group (PMG) methodology of Pesaran et al. (1999) for estimation. The latter takes account of cross-country heterogeneity and cross-sectional dependence, while the former controls for biases associated with simultaneity and unobserved country-specific effects. Using both annual data for 1970-2007 and five-year non-overlapping observations, we find that while commodity terms of trade growth enhances real output per capita, volatility exerts a negative impact on economic growth operating mainly through lower accumulation of physical capital. Our results indicate that the negative growth effects of CTOT volatility offset the positive impact of commodity booms.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/1c2719709b865eaabc832af7f7795c68df4089f3
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Citations in the corpus
- An Empirical Growth Model for Major Oil Exporters (2012, unknown): “…early contributions on the importance of rent seeking in oil exporting economies see Mahdavi (1970) and Pesaran (1982) 2In a recent paper, Cavalcanti et al. (2012) argue that it is the volatility of commodity prices rather than abundance per se, that drives the "resource curse" paradox.”
- Ending Extreme Poverty and Sharing Prosperity: Progress and Policies (2015, background): “…alleviate demand and supply constraints on productivity activity by improving infrastructure, creating a conducive investment climate, and facilitating private sector access to capital, skills, technology and markets (Chandra, Lin, and Wang 2012; De Cavalcanti, Mohaddes, and Raissi 2012; IMF 2011).”
- Growth, Development and Natural Resources: New Evidence Using a Heterogeneous Panel Analysis (2011, unknown): “10 10Another way of dealing with cross-country dependence is to apply the cross-sectionally augmented Pooled Mean Group (CPMG) approach, see Cavalcanti et al. (2011) for more details.”