On the asymmetric effect of commodity terms of trade shocks on growth in commodity-dependent countries: Does the choice of exchange rate regimes matter?

This paper analyzes the asymmetric effects of commodity terms-of-trade shocks on economic growth in resource-dependent economies, with a focus on exchange rate regimes. Using panel data and appropriate estimators, the study finds that negative shocks significantly reduce growth, while positive shocks do not consistently yield benefits — especially in agriculture-based countries. The exchange rate regime plays a key role: fixed regimes absorb shocks faster but risk competitiveness losses, while flexible regimes offer more adjustment capacity but face greater volatility. These findings highlight the need for tailored macroeconomic policies to enhance resilience to external shocks.