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Resource Windfalls and Emerging Market Sovereign Bond Spreads

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Author Info

  • Rabah Arezki
  • Markus Bruckner

Abstract

We examine the effect that revenue windfalls from international commodity price shocks have on sovereign bond spreads using panel data for 30 emerging market economies during the period 1997-2007. Our main finding is that positive commodity price shocks 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 shocks significantly increased real per capita GDP growth in democracies, while in autocracies GDP per capita growth decreased.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/179.

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Length: 11
Date of creation: 01 Jul 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/179

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Related research

Keywords: Bonds; External debt; External shocks; Gross domestic product; Sovereign debt; sovereign bond; sovereign bonds; bond; bond spreads; bond spread; debt default; debt crisis; crowding out; sovereign default; bond issuing; government bond; bond index; central bank;

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Cited by:
  1. 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.
  2. Jeffrey Frankel, 2011. "A Solution to Fiscal Procyclicality: the Structural Budget Institutions Pioneered by Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 14(2), pages 39-78, August.
  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. Frankel, Jeffrey A., 2012. "The Natural Resource Curse: A Survey of Diagnoses and Some Prescriptions," Scholarly Articles 8694932, Harvard Kennedy School of Government.
  5. 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.

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