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The Resource Curse and Fiscal Policy Volatility

  • Michael Bleaney
  • Håvard Halland
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    Using data from 1980 to 2004, we show that greater fiscal policy volatility acts as a transmission mechanism for the ‘resource curse’. Resource exports dominate political and institutional variables as determinants of fiscal policy volatility, with fiscal policy volatility being a significant determinant of growth. The existence of a resource curse is confirmed, in the sense that a higher ratio of natural resource exports to total merchandise exports is associated with significantly slower per capita GDP growth. There are no statistically significant differences between the effects of point-source and diffuse resource exports.

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    Paper provided by University of Nottingham, CREDIT in its series Discussion Papers with number 09/09.

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    Handle: RePEc:not:notcre:09/09
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    School of Economics University of Nottingham University Park Nottingham NG7 2RD

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    1. Simon Guttmann & Anthony Richards, 2006. "Trade Openness: An Australian Perspective," Australian Economic Papers, Wiley Blackwell, vol. 45(3), pages 188-203, 09.
    2. Frederick van der Ploeg & Steven Poelhekke, 2007. "Volatility, Financial Development and the Natural Resource Curse," Economics Working Papers ECO2007/36, European University Institute.
    3. Jonathan Isham & Michael Woolcock & Lant Pritchett & Gwen Busby, 2005. "The Varieties of Resource Experience: Natural Resource Export Structures and the Political Economy of Economic Growth," World Bank Economic Review, World Bank Group, vol. 19(2), pages 141-174.
    4. Christa N. Brunnschweiler, 2006. "Cursing the blessings? Natural resource abundance, institutions, and economic growth," CER-ETH Economics working paper series 06/51, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    5. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
    6. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
    7. Paul Cashin & Luis Felipe Céspedes & Ratna Sahay, 2003. "Commodity Currencies and the Real Exchange Rate," Working Papers Central Bank of Chile 236, Central Bank of Chile.
    8. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
    9. Sachs, J-D & Warner, A-M, 1996. "Sources of Slow Growth in African Economies," Papers 545, Harvard - Institute for International Development.
    10. Bleaney, Michael & Nishiyama, Akira, 2002. "Explaining Growth: A Contest between Models," Journal of Economic Growth, Springer, vol. 7(1), pages 43-56, March.
    11. Francesco Caselli & Tom Cunningham, 2009. "Leader Behavior and the Natural Resource Curse," CEP Discussion Papers dp0913, Centre for Economic Performance, LSE.
    12. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-51, December.
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