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Resource Windfalls, Macroeconmic Stability and Growth: The Role of Political Institutions


  • Rabah Arezki
  • Kirk Hamilton
  • Kazim Kazimov


We use a new dataset on non-resource GDP to examine the performance of commodity-exporting countries in terms of macroeconomic stability and economic growth in a panel of up to 129 countries during the period 1970-2007. Our main findings are threefold. First, we find that overall government spending in commodity-exporting countries has been procyclical. Second, we find that resource windfalls initially crowd out non-resource GDP which then increases as a result of the fiscal expansion. Third, we find that in the long run resource windfalls have negative effects on non-resource sector GDP growth. Yet, the effects turn out to be statistically insignificant when controlling for government spending. Both the effects of resource windfalls on macroeconomic stability and economic growth are moderated by the quality of political institutions.

Suggested Citation

  • Rabah Arezki & Kirk Hamilton & Kazim Kazimov, 2011. "Resource Windfalls, Macroeconmic Stability and Growth: The Role of Political Institutions," CESifo Working Paper Series 3678, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3678

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    Cited by:

    1. Jeffrey Frankel, 2017. "How to Cope with Volatile Commodity Export Prices: Four Proposals," CID Working Papers 335, Center for International Development at Harvard University.
    2. Mustapha K. Nabli & Rabah Arezki, 2012. "Natural Resources, Volatility, and Inclusive Growth; Perspectives From the Middle East and North Africa," IMF Working Papers 12/111, International Monetary Fund.
    3. Sidi Mohammed Chekouri & Abderrahim Chibi, 2016. "Algeria and the Natural Resource Curse: Oil Abundance and Economic Growth," Working Papers 990, Economic Research Forum, revised Apr 2016.
    4. Alan H. Gelb & Arnaud Dupuy & Rabah Arezki, 2012. "Resource Windfalls, Optimal Public Investment and Redistribution; The Role of Total Factor Productivity and Administrative Capacity," IMF Working Papers 12/200, International Monetary Fund.
    5. Ibrahim Ahmed Elbadawi & Raimundo Soto, 2012. "Resource Rents, Political Institutions and Economic Growth," Documentos de Trabajo 413, Instituto de Economia. Pontificia Universidad Católica de Chile..
    6. MASWANA, Jean-Claude & FAROOKI, Masuma, 2013. "African Economic Growth Prospects: A Resource Curse Perspective," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(2), pages 169-182.
    7. Dobronogov, Anton & Gelb, Alan & Saldanha, Fernando Brant, 2014. "How should donors respond to resource windfalls in poor countries ? from aid to insurance," Policy Research Working Paper Series 6952, The World Bank.
    8. Tiago Cavalcanti & Daniel Da Mata & Frederik Toscani, 2014. "Winning the Oil Lottery: The Impact of Natural Resource Extraction on Growth," Cambridge Working Papers in Economics 1455, Faculty of Economics, University of Cambridge.
    9. Raimundo Soto & Ilham Haouas, 2012. "Has the UAE Escaped the Oil Curse?," Working Papers 728, Economic Research Forum, revised 2012.
    10. Munseob Lee & Cheikh A. Gueye, 2015. "Do Resource Windfalls Improve the Standard of Living in Sub-Saharan African Countries?; Evidence from a Panel of Countries," IMF Working Papers 15/83, International Monetary Fund.
    11. Christian von Haldenwang & Maksym Ivanyna, 2017. "Does the political resource curse affect public finance? The vulnerability of tax revenue in resource-rich countries," WIDER Working Paper Series 007, World Institute for Development Economic Research (UNU-WIDER).
    12. Mahmoud Al-Iriani, 2012. "Oil Curse in Yemen: The Role of Institutions and Policy," Working Papers 694, Economic Research Forum, revised 2012.
    13. Abdellah Belhadia & Nawal Belbouab, 2014. "Islamic vs. Conventional Banking Role in Non-Oil Growth: A Causal Analysis in the Case of Bahrain," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 4(12), pages 1-15, December.
    14. Ahmadov, Ingilab & Mammadov, Jeyhun & Aslanli, Kenan, 2013. "Assessment of Institutional Quality in Resource-Rich Caspian Basin Countries," MPRA Paper 47430, University Library of Munich, Germany.
    15. Frankel, Jeffrey A., 2012. "The Natural Resource Curse: A Survey of Diagnoses and Some Prescriptions," Scholarly Articles 8694932, Harvard Kennedy School of Government.
    16. Elva Bova & Paulo A Medas & Tigran Poghosyan, 2016. "Macroeconomic Stability in Resource-Rich Countries; The Role of Fiscal Policy," IMF Working Papers 16/36, International Monetary Fund.
    17. Andrew M. Warner, 2015. "Natural Resource Booms in the Modern Era; Is the curse still alive?," IMF Working Papers 15/237, International Monetary Fund.
    18. Jeyhun Mammadov & Assoc. Prof. Dr. Jeyhun Mammadov & Prof. Dr. Ingilab Ahmadov & PhD candidate, Kenan Aslanli, 2013. "Assessment of Institutional Quality in Resource Rich Caspian Basin Countries," International Conference on Energy, Regional Integration and Socio-economic Development 5994, EcoMod.
    19. Farhadi, Minoo & Islam, Md. Rabiul & Moslehi, Solmaz, 2015. "Economic Freedom and Productivity Growth in Resource-rich Economies," World Development, Elsevier, vol. 72(C), pages 109-126.

    More about this item


    commodity; fiscal policy; macroeconomic stability; economic growth;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models


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