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Terms of Trade and Growth of Resource Economies: A Tale of Two Countries

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  • Augustin Kwasi Fosu

Abstract

The current paper demonstrates a dichotomy of the growth response to changes in the barter terms of trade, employing as case studies the two African countries, Botswana and Nigeria.Using distributed-lag analysis, the paper finds that the effect of terms of trade on output is positive and negative for the two countries, respectively. I interpret these results as supportive of the ‘resource curse’ hypothesis for Nigeria, but not for Botswana.I further argue that the superior institutional quality in Botswana, relative to Nigeria, is likely responsible for the contrasting results. However, Nigeria appears to be making progress on institutional quality, especially in the last decade. Continuing such progress would be necessary if the country was to reverse course.

Suggested Citation

  • Augustin Kwasi Fosu, 2011. "Terms of Trade and Growth of Resource Economies: A Tale of Two Countries," WIDER Working Paper Series 028, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:wp2011-28
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    Cited by:

    1. Evans Stephen Osabuohien & Uchenna Rapuluchukwu Efobi, 2013. "Africa's Money in Africa," South African Journal of Economics, Economic Society of South Africa, vol. 81(2), pages 292-306, June.

    More about this item

    Keywords

    resource economies; terms of trade; growth;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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