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Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum

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Author Info
Collier, Paul
Goderis, Benedikt

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Abstract

Currently, evidence on the ‘resource curse’ yields a conundrum. While there is much cross section evidence to support the curse hypothesis, time series analyses using vector autoregressive (VAR) models have found that commodity booms raise the growth of commodity exporters. This paper adopts panel cointegration methodology to explore longer term effects than permitted using VARs. We find strong evidence of a resource curse. Commodity booms have positive short-term effects on output, but adverse long-term effects. The long-term effects are confined to “high-rent”, non-agricultural commodities. We also find that the resource curse is avoided by countries with sufficiently good institutions. We test the channels of the resource curse proposed in the literature and find that it is explained by real exchange rate appreciation and public and private consumption. Our findings have important implications for non-agricultural commodity exporters with weak institutions, especially in light of the current unprecedented boom in global commodity prices.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17315.

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Date of creation: 15 Jun 2008
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Handle: RePEc:pra:mprapa:17315

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Related research
Keywords: commodity prices; natural resource curse; growth;

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Find related papers by JEL classification:
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Goderis, Benedikt & Malone, Samuel W., 2009. "Natural Resource Booms and Inequality: Theory and Evidence," MPRA Paper 17317, University Library of Munich, Germany. [Downloadable!]
  2. Collier, Paul & Goderis, Benedikt, 2009. "Structural policies for shock-prone developing countries," MPRA Paper 17311, University Library of Munich, Germany. [Downloadable!]
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