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Commodity prices and growth: An empirical investigation

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  • Collier, Paul
  • Goderis, Benedikt

Abstract

Whereas empirical evidence on the effect of higher commodity prices on the long-run growth of commodity exporters is ambiguous, time series analyses using vector autoregressive (VAR) models have found that commodity booms raise income in the short run. In this paper we adopt panel error correction methodology to analyze global data for 1963 to 2008 to disentangle the short and long run effects of international commodity prices on output per capita. Our results show that commodity booms have unconditional positive short-term effects on output, but non-agricultural booms in countries with poor governance have adverse long-term effects which dominate the short-run gains. Our findings have important implications for non-agricultural commodity exporters with poor governance, especially in light of the recent wave of resource discoveries in low-income countries.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 56 (2012)
Issue (Month): 6 ()
Pages: 1241-1260

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Handle: RePEc:eee:eecrev:v:56:y:2012:i:6:p:1241-1260

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Keywords: Commodity prices; Natural resource curse; Growth;

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Cited by:
  1. Crafts, Nicholas & O’Rourke, Kevin Hjortshøj, 2014. "Twentieth Century Growth*This research has received funding from the European Research Council under the European Union’s Seventh Framework Programme (FP7/2007-2013) / ERC grant agreement no. 249546," Handbook of Economic Growth, in: Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 263-346 Elsevier.
  2. Andrea Bonilla, 2014. "External vulnerabilities and economic integration. Is the Union of South American Nations a promising project ?," Working Papers halshs-00945044, HAL.
  3. Torfinn Harding & Anthony J Venables, 2013. "The Implications of Natural Resource Exports for Non-Resource Trade," OxCarre Working Papers 103, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  4. Thorvaldur Gylfason & Gylfi Zoega, 2014. "The Dutch Disease in Reverse: Iceland's Natural Experiment," OxCarre Working Papers 138, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  5. Andrea Bonilla Bolanos, 2014. "External Vulnerabilities And Economic Integration: Is The Union Of South American Nations A Promising Project?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 39(2), pages 97-131, June.
  6. Patricia Gómez-González & Daniel Rees, 2013. "Stochastic Terms of Trade Volatility in Small Open Economies," RBA Research Discussion Papers rdp2013-10, Reserve Bank of Australia.
  7. Addison, Tony & Ghoshray, Atanu, 2014. "Agricultural Commodity Price Shocks and their Effect on Growth in Sub-Saharan Africa," 88th Annual Conference, April 9-11, 2014, AgroParisTech, Paris, France 169726, Agricultural Economics Society.
  8. Darryl McLeod & Nora Lustig, 2011. "Inequality and Poverty under Latin America's New Left Regimes," Working Papers 1117, Tulane University, Department of Economics.
  9. Firew B Woldeyes, 2013. "Long-run Effects of Resource Rents in Developing Countries: The role of public investment management," OxCarre Working Papers 105, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.

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