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Commodity Price Volatility, Democracy and Economic Growth

Author

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  • Rabah Arezki
  • Thorvaldur Gylfason

Abstract

We use a new dataset on non-resource GDP to examine the impact of commodity price volatility on economic growth in a panel of up to 158 countries during the period 1970-2007. Our main finding is that commodity price volatility leads to a significant increase in non-resource GDP growth in democracies, but to no significant increase in autocracies. To explain this result, we show that increased commodity price volatility leads to a statistically significant and quantitatively large increase in net national saving in democracies. In autocracies, on the other hand, net national saving decreased significantly. Our results hold true when using indicators capturing the quality of economic institutions in lieu of indicators of political institutions.

Suggested Citation

  • Rabah Arezki & Thorvaldur Gylfason, 2011. "Commodity Price Volatility, Democracy and Economic Growth," CESifo Working Paper Series 3619, CESifo.
    • Handle: RePEc:ces:ceswps:_3619
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Mr. Mustapha K. Nabli & Mr. Rabah Arezki, 2012. "Natural Resources, Volatility, and Inclusive Growth: Perspectives From the Middle East and North Africa," IMF Working Papers 2012/111, International Monetary Fund.
    2. Jean Marcelin B. Brou & Mbodja Mougoué & Eugene Kouassi & Kebaabetswe Thulaganyo & Benjamin K. Acquah, 2022. "Effects of diamond price volatility on stock returns: Evidence from a developing economy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1025-1043, January.
    3. Panos Hatzipanayotou & Panagiotis Konstantinou & Ioanna Pantelaiou & Anastasios Xepapadeas, 2018. "ERSs and Trade in Natural Resources: The Impact on Economic Growth and Poverty in LDCs," DEOS Working Papers 1809, Athens University of Economics and Business.
    4. Valentine Soumtang Bime & Itchoko Motande Mondjeli Mwa Ndjokou, 2023. "Does institutional quality matter in financial development and income inequality nexus? new evidence from Sub-Saharan Africa," Economics Bulletin, AccessEcon, vol. 43(3), pages 1395-1410.
    5. Henri, Pr Atangana Ondoa, 2019. "Natural resources curse: A reality in Africa," Resources Policy, Elsevier, vol. 63(C), pages 1-1.
    6. elias elhannani, farah & boussalem, abou bakr & Benbouziane, Mohamed, 2016. "Financial development and the oil curse: Evidence from Algeria," MPRA Paper 81866, University Library of Munich, Germany, revised May 2016.
    7. Hachula, Michael & Hoffmann, Sebastian, 2015. "The output effects of commodity price volatility: Evidence from exporting countries," Discussion Papers 2015/29, Free University Berlin, School of Business & Economics.
    8. Sidi Mohammed Chekouri & Abderrahim Chibi & Mohamed Benbouziane, 2017. "Algeria and the natural resource curse: oil abundance and economic growth," Middle East Development Journal, Taylor & Francis Journals, vol. 9(2), pages 233-255, July.
    9. Gulzar Khan & Ather Maqsood Ahmed, 2020. "Understanding Business Cycle Fluctuations in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 59(1), pages 1-28.
    10. Luan, Yunpeng & Ye, Shili & Li, Yanmei & Jia, Lu & Yue, Xiao-Guang, 2022. "Revisiting natural resources volatility via TGARCH and EGARCH," Resources Policy, Elsevier, vol. 78(C).
    11. Syed, Qasim Raza & Durani, Farah & Kisswani, Khalid M. & Alola, Andrew Adewale & Siddiqui, Aaliyah & Anwar, Ahsan, 2024. "Testing natural resource curse hypothesis amidst geopolitical risk: Global evidence using novel Fourier augmented ARDL approach," Resources Policy, Elsevier, vol. 88(C).
    12. Chekouri, Sidi Mohamed & Benbouziane, Mohamed & Chibi, Abderrahim, 2017. "Oil rents and institutional quality: empirical evidence from Algeria," MPRA Paper 81862, University Library of Munich, Germany, revised Sep 2017.
    13. Kaznacheev, Peter, 2013. "Resource Rents and Economic Growth: Economic and institutional development in countries with a high share of income from the sale of natural resources. Analysis and recommendations based on internatio," EconStor Research Reports 121950, ZBW - Leibniz Information Centre for Economics.
    14. Thorvaldur Gylfason & Jean-Pascal Nguessa Nganou, 2014. "Diversification, Dutch Disease, and Economic Growth: Options for Uganda," CESifo Working Paper Series 5095, CESifo.

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    More about this item

    Keywords

    commodity prices; volatility; democracy; economic growth;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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