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Resource Windfalls and Emerging Market Sovereign Bond Spreads: The Role of Political Institutions

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Author Info

  • Rabah Arezki

    ()
    (International Monetary Fund (IMF))

  • Markus Bruckner

    ()
    (School of Economics, University of Adelaide)

Abstract

We examine the effect that revenue windfalls from international commodity price booms have on sovereign bond spreads using panel data for 36 emerging market economies during the period 1997-2007. Our main finding is that commodity price booms lead to a significant reduction in the sovereign bond spread in democracies, but to a significant increase in the spread in autocracies. To explain our finding we show that, consistent with the political economy literature on the resource curse, revenue windfalls from international commodity price booms significantly increased real per capita GDP growth in democracies, while in autocracies GDP per capita growth decreased.

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File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2011-08.pdf
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Bibliographic Info

Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2011-08.

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Length: 26 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:adl:wpaper:2011-08

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Keywords: commodity price shocks; sovereign bond spread; political institutions;

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  1. Frederick Van der Ploeg, 2010. "Natural Resources: Curse or Blessing?," CESifo Working Paper Series 3125, CESifo Group Munich.
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Cited by:
  1. Jeffrey Frankel, 2011. "A Solution to Fiscal Procyclicality: the Structural Budget Institutions Pioneered by Chile," Working Papers Central Bank of Chile 604, Central Bank of Chile.
  2. Frankel, Jeffrey, 2011. "A Solution to Overoptimistic Forecasts and Fiscal Procyclicality: The Structural Budget Institutions Pioneered by Chile," Working Paper Series 11-012, Harvard University, John F. Kennedy School of Government.
  3. Frankel, Jeffrey A., 2011. "How Can Commodity Exporters Make Fiscal and Monetary Policy Less Procyclical?," Scholarly Articles 4735392, Harvard Kennedy School of Government.
  4. Kablan, Sandrine & Loening, Josef, 2012. "Is Chad affected by Dutch or Nigerian disease?," MPRA Paper 39799, University Library of Munich, Germany, revised 02 Jul 2012.
  5. Frankel, Jeffrey A., 2012. "The Natural Resource Curse: A Survey of Diagnoses and Some Prescriptions," Working Paper Series rwp12-014, Harvard University, John F. Kennedy School of Government.

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