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

Author/Editor: Arezki, Rabah | Hamilton, Kirk | Kazimov, Kazim
Authorized for Distribution: June 1, 2011
Electronic Access: Free Full Text (PDF file size is 1,096KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: 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.
 
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Series: Working Paper No. 11/142
Subject(s): Agricultural exports | Commodities | Developing countries | Economic growth | Energy | Exports | Fiscal policy | Fiscal stability | Governance | Government expenditures | Natural resources
Author's keyword(s): Commodity; fiscal policy; macroeconomic stability; economic growth
 
English  
    Published:   June 1, 2011        
            Format:   Paper
    Stock No:   WPIEA2011142   Pages:   25
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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