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The long run effects of commodity price volatility on growth and inflation: A cross-country panel estimation

Author

Listed:
  • Adil Mohommad

    (IMF)

  • Mehdi Raissi

    (IMF)

Abstract

We study the impact of commodity terms of trade (CToT) volatility on long-term economic growth and its drivers as well as on inflation, in a sample of 118 countries over 1970-2019, including 69 commodity exporters. Our econometric approaches account for bi-directional feedback effects, cross-country heterogeneity, and cross-sectional dependences. We find that CToT volatility exerts a negative impact on long-term economic growth, mainly through lower capital accumulation. This offsets the positive impact on growth from commodity price booms (especially in resource-rich economies). Furthermore, we observe that higher CToT volatility leads to greater volatility in inflation rather than structurally higher inflation.

Suggested Citation

  • Adil Mohommad & Mehdi Raissi, 2025. "The long run effects of commodity price volatility on growth and inflation: A cross-country panel estimation," Economics Bulletin, AccessEcon, vol. 45(2), pages 910-918.
    • Handle: RePEc:ebl:ecbull:eb-25-00029
    as

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    References listed on IDEAS

    as
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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F1 - International Economics - - Trade

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