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Terms of Trade Volatility, Government Spending Cyclicality, and Economic Growth

Listed author(s):
  • Markus Brueckner
  • Francisco Carneiro

This paper presents estimates of the effects that terms of trade volatility has on real GDP per capita growth. Based on 5-year non-overlapping panel data comprising 175 countries during 1980-2010, the paper finds that terms of trade volatility has significant adverse effects on economic growth in countries with procyclical government spending; in countries where government spending is countercyclical terms of trade volatility has no significant effect on growth. Conditional on the mediating role of government spending cyclicality, the GDP share of domestic credit to the private sector has no significant effect on the relationship between growth and terms of trade volatility.

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File URL: https://www.cbe.anu.edu.au/researchpapers/econ/wp638.pdf
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Paper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2016-638.

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Date of creation: Jun 2016
Handle: RePEc:acb:cbeeco:2016-638
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