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Commodity Windfalls, Polarization, and Net Foreign Assets

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Author Info

  • Markus Bruckner
  • Rabah Arezki

Abstract

This paper examines the effect that windfalls from international commodity price booms have on net foreign assets in a panel of 145 countries during the period 1970-2007. The main finding is that windfalls from international commodity price booms lead to a significant increase in net foreign assets, but only in countries that are homogeneous. In polarized countries, net foreign assets significantly decreased. To explain this asymmetry, the paper shows that in polarized countries commodity windfalls lead to large increases in government spending, political corruption, and the risk of expropriation, with no overall effect on GDP per capita growth. The paper''s findings are consistent with theoretical models of the current account that have a built-in voracity effect.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/209.

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Length: 24
Date of creation: 01 Sep 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/209

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Related research

Keywords: Asset management; Commodity price fluctuations; Current account surpluses; Economic models; Government expenditures; foreign assets; net foreign assets; net foreign asset; foreign asset; net foreign asset position; foreign asset position; trade shocks; net foreign asset positions; foreign asset positions; capital flows;

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