## _wp1053 - References

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---

### I. Research question, sample, identification, and main result
- Research question: How do developing and emerging market economies use external borrowing to shield themselves against international commodity price shocks?
- Sample and period: panel data for a world sample of over 93 countries during the period 1970-2007.
- Identification strategy:
  - Panel data techniques with country fixed effects (αi) and year fixed effects (βt); effects identified from within-country variation.
- Main empirical finding:
  - Increases in international commodity prices for exported commodity goods are associated with a significant reduction in external debt in democracies.
  - In autocracies, windfalls from international commodity prices did not lead to a significant reduction in external debt.
  - Conclusion: external debt moved countercyclically with international commodity price shocks in democracies, and there was no systematic relationship in autocracies.

### II. Data construction and key variables
- International commodity price shocks:
  - Country-specific international commodity price index capturing shocks to international prices of exported commodities.
  - Annual international commodity price data for the 1970-2007 period from UNCTAD Commodity Statistics.
  - Value of commodity exports from the NBER-United Nations Trade Database.
  - Commodities included: aluminum, beef, coffee, cocoa, copper, cotton, gold, iron, maize, oil, rice, rubber, sugar, tea, tobacco, wheat, and wood.
  - Commodity price shocks identified by the (log) change in the international commodity price.
- External debt:
  - Data from the World Bank, Global Development Finance (2009).
  - Definition: total external debt is debt owed to nonresidents repayable in foreign currency, goods, or services; sum of public, publicly guaranteed, and private nonguaranteed long-term debt, use of IMF credit, and short-term debt.
- Democracy and political institutions:
  - Democracy measured by the revised combined Polity score (Polity2) of the Polity IV database (Marshall and Jaggers, 2009).
  - Polity2 ranges from -10 to +10; democracies coded if Polity2 score is strictly positive, autocracies if strictly negative.
  - Deep democracies: Polity2 > 6; deep autocracies: Polity2 < -6.
  - Polity sub-scores used: constraints on the chief executive (ranges from 1 to 7), political competition (ranges from 1 to 10).
- Other data:
  - Government expenditures data from Heston et al. (2009).
  - External debt default data from Beers and Chambers (2003).

### III. Estimation strategy and robustness checks
- Baseline model:
  - Panel regression with country fixed effects (αi) and year fixed effects (βt); errors clustered at the country level.
- Approach:
  - Estimate average marginal effect of commodity price shocks on external debt for full sample.
  - Split sample into democracies and autocracies; estimate separately.
  - Formal test of coefficient differences across regimes using a generalized Chow test allowing for arbitrary within-country serial correlation.
- Additional checks and specifications:
  - Inclusion of leads (t+1) of commodity price shocks to test anticipatory effects.
  - Controls for country-years with external debt relief.
  - Dynamic panel specifications including lagged external debt (least squares and system-GMM).
  - Nonlinear probability model (conditional logit fixed effects) for default risk to avoid incidental parameter bias.

### IV. Main empirical results — magnitudes and statistical evidence
- Pooled and fixed effects (Table 1) — headline dynamics:
  - ComPrice Shock, t coefficients (LS columns): (1) -0.524 (t-value -1.03); (2) -0.503 (t-value -0.94); (3) -0.182 (t-value -0.38); (4) -0.160 (t-value -0.34); (5) -0.203 (t-value -0.43); (6) -0.108 (t-value -0.21); (7, SYS-GMM) -0.227 (t-value -0.40).
  - ComPrice Shock, t-1 coefficients: (1) -1.387*** (t-value -3.69); (2) -1.377*** (t-value -3.62); (3) -0.844** (t-value -1.97); (4) -0.905** (t-value -2.06); (5) -0.856** (t-value -1.97); (6) -0.980** (t-value -2.48); (7) -0.671* (t-value -1.79).
  - Quantitative magnitude: a positive international commodity price shock of size 1 standard deviation significantly decreased on average external debt by over 0.04 standard deviations.
  - Anticipatory effects: period t+1 commodity price shocks not statistically significant; no evidence of significant anticipatory effects.
- Dynamics and persistence:
  - Dynamic panel estimates show persistence in external debt.
  - Estimated convergence coefficient: -0.120.
  - Implied half life in shocks to the level of external debt: around 5.4 years.
- Heterogeneity by regime (Table 2):
  - ComPrice Shock, t-1 coefficients:
    - Deep Democracy (Polity2 >6, column (1)): -6.103*** (t-value -2.64); Observations: 409.
    - Democracy (Polity2 >0, column (2)): -1.676** (t-value -2.16); Observations: 1221.
    - Autocracy (Polity2 <=0, column (3)): -0.098 (t-value -0.18); Observations: 1445.
    - Deep Autocracy (Polity2 <-6, column (4)): -0.024 (t-value -0.03); Observations: 357.
  - Chow test p-values reported on equality with column (1): [0.017], [0.007], [0.008].
  - Interpretation: Significant negative effect concentrated in democracies, especially deep democracies; autocracies show statistically insignificant and near-zero estimates.
- Executive constraints and political competition (Table 3):
  - ComPrice Shock, t-1 coefficients:
    - Strong Executive Constraints (column (1)): -1.778** (t-value -2.24); Observations: 1283.
    - Weak Executive Constraints (column (2)): 0.153 (t-value 0.28); Observations: 1393.
    - Strong Political Competition (column (3)): -1.797** (t-value -2.04); Observations: 1172.
    - Weak Political Competition (column (4)): -0.081 (t-value -0.16); Observations: 1504.
  - Chow test p-values: [0.039] (for executive constraints comparison); [0.085] (for political competition comparison).
- Government expenditures channel (Table 4):
  - ComPrice Shock, t-1 coefficients on log-change of total government expenditures:
    - Democracy (column (1)): -0.020 (t-value -0.09); Observations: 2314.
    - Autocracy (column (2)): 0.918*** (t-value 3.89); Observations: 2269.
    - Strong Executive Constraints (column (3)): 0.047 (t-value 0.24); Observations: 2459.
    - Weak Executive Constraints (column (4)): 0.856*** (t-value 3.66); Observations: 2124.
    - Strong Political Competition (column (5)): 0.085 (t-value 0.55); Observations: 2415.
    - Weak Political Competition (column (6)): 0.776*** (t-value 2.86); Observations: 2168.
  - Chow test p-values reported: [0.004], [0.008], [0.004].
  - Interpretation: Autocracies and weak-institution countries increase government expenditures following positive commodity shocks; democracies and strong-institution countries do not.
- Rule of law channel (Table 5):
  - ComPrice Shock, t-1 coefficients on change in the ICRG rule of law variable:
    - Democracy (column (1)): 3.725** (t-value 2.38); Observations: 1256.
    - Autocracy (column (2)): -0.401 (t-value -0.46); Observations: 1214.
    - Strong Executive Constraints (column (3)): 3.836** (t-value 2.43); Observations: 1334.
    - Weak Executive Constraints (column (4)): -0.572 (t-value -0.67); Observations: 1136.
    - Strong Political Competition (column (5)): 4.321** (t-value 2.44); Observations: 1214.
    - Weak Political Competition (column (6)): -0.494 (t-value -0.65); Observations: 1256.
  - Chow test p-values: [0.020], [0.013], [0.011].
  - Interpretation: Rule of law improves in democracies following windfalls, and deteriorates or does not change in autocracies.
- Output effects (Table 6):
  - ComPrice Shock, t-1 coefficients on log-change of real per capita GDP:
    - Democracy (column (1)): 0.269* (t-value 1.83); Observations: 2314.
    - Autocracy (column (2)): -0.317 (t-value -1.23); Observations: 2269.
    - Strong Executive Constraints (column (3)): 0.275* (t-value 1.84); Observations: 2459.
    - Weak Executive Constraints (column (4)): -0.329 (t-value -1.28); Observations: 2124.
    - Strong Political Competition (column (5)): 0.300** (t-value 2.19); Observations: 2267.
    - Weak Political Competition (column (6)): -0.341 (t-value -1.32); Observations: 2316.
  - Chow test p-values: [0.045], [0.040], [0.027].
  - Interpretation: Positive commodity price shocks associated with higher real per capita GDP growth in democracies and strong-institution countries; no significant output gains in autocracies despite higher government spending.
- Default risk (Table 7):
  - Conditional logit fixed effects estimates (ComPrice Shock, t-1):
    - Democracy (column (1)): -12.925 (t-value -1.00); Observations: 640.
    - Autocracy (column (2)): 9.759* (t-value 1.81); Observations: 1174.
    - Strong Executive Constraints (column (3)): -15.984 (t-value -1.36); Observations: 708.
    - Weak Executive Constraints (column (4)): 16.009*** (t-value 2.69); Observations: 1106.
    - Strong Political Competition (column (5)): -14.278 (t-value -1.17); Observations: 638.
    - Weak Political Competition (column (6)): 10.525** (t-value 1.97); Observations: 1176.
  - Chow test p-values: [0.059], [0.007], [0.016].
  - Interpretation: Windfalls reduce default risk in democracies (negative point estimates) but increase default risk in autocracies (positive and sometimes significant estimates).
- Robustness:
  - No significant asymmetry between positive and negative commodity price shocks.
  - Quadratic (nonlinear) term in shocks insignificant.
  - No significant differential impact between price shocks of minerals vs. agricultural commodities.
  - Results robust when interacting shocks with per capita GDP level.

### V. Interpretation and policy implications
- Political institutions matter for how commodity windfalls are used:
  - Democracies constrain politicians from spending commodity windfalls on potentially wasteful or opaque expenditures and instead use windfalls to reduce external debt.
  - Autocracies tend to increase government expenditures with windfalls, which may be socially sub-optimal and does not translate into higher real per capita GDP.
- Voracity effect:
  - Evidence consistent with the voracity effect (Lane and Tornell, 1998; Tornell and Lane, 1999): revenue windfalls lead to disproportionate fiscal redistribution in countries with weak legal-political institutions.
  - Strong executive constraints attenuate the voracity effect; weak constraints amplify it.
- Default risk:
  - Windfalls reduce default risk in democracies but increase default risk in autocracies.
- Policy question for future research:
  - Whether fiscal rules could reduce procyclicality of government spending to commodity price shocks in autocracies remains an open empirical question; effectiveness depends on whether fiscal rules can be enforced or circumvented through creative accounting.

*Source: _wp1053 - References (PDF), content pages 3–14*

### References .............................................................................................................

### _wp1053 - References

### I. Introduction — research question and main result
- Research question: How do developing and emerging market economies use external borrowing to shield themselves against international commodity price shocks?
- Sample and period: panel data for a world sample of over 93 countries during the period 1970-2007.
- Identification strategy: panel data techniques that account for unobservable cross-country heterogeneity (country fixed effects) and common year shocks (year fixed effects); effects identified from within-country variation.
- Main empirical finding:
  - Increases in international commodity prices for exported commodity goods are associated with a significant reduction in external debt in democracies.
  - In autocracies, windfalls from international commodity prices did not lead to a significant reduction in external debt.
  - Conclusion: external debt moved countercyclically with international commodity price shocks in democracies, and there was no systematic relationship in autocracies.

### II. Data — key variables and construction
- International commodity price shocks:
  - Constructed as a country-specific international commodity price index capturing shocks to international prices of exported commodities.
  - Annual international commodity price data for the 1970-2007 period from UNCTAD Commodity Statistics.
  - Value of commodity exports from the NBER-United Nations Trade Database.
  - Commodities included: aluminum, beef, coffee, cocoa, copper, cotton, gold, iron, maize, oil, rice, rubber, sugar, tea, tobacco, wheat, and wood.
  - Commodity price shocks identified by the (log) change in the international commodity price.
- External debt:
  - Data from the World Bank, Global Development Finance (2009).
  - Definition: total external debt is debt owed to nonresidents repayable in foreign currency, goods, or services; sum of public, publicly guaranteed, and private nonguaranteed long-term debt, use of IMF credit, and short-term debt.
- Democracy and political institutions:
  - Democracy measured by the revised combined Polity score (Polity2) of the Polity IV database (Marshall and Jaggers, 2009).
  - Polity2 ranges from -10 to +10; democracies coded if Polity2 score is strictly positive, autocracies if strictly negative.
  - Deep democracies: Polity2 > 6; deep autocracies: Polity2 < -6.
  - Polity sub-scores used: constraints on the chief executive (ranges from 1 to 7), political competition (ranges from 1 to 10).
- Government expenditures data: from Heston et al. (2009).
- External debt default data: from Beers and Chambers (2003).

### III. Estimation strategy — model and testing
- Baseline econometric model: panel regression with country fixed effects (αi) and year fixed effects (βt), error clustered at the country level.
- Approach:
  - Estimate average marginal effect of commodity price shocks on external debt for full sample.
  - Split sample into democracies and autocracies; estimate separately.
  - Formal test of coefficient differences across regimes: generalized Chow test allowing for arbitrary within-country serial correlation.
- Additional checks:
  - Leads (t+1) of commodity price shocks included to test for anticipatory effects.
  - Controls for country-years with external debt relief.
  - Dynamic panel specifications including lagged external debt (least squares and system-GMM).
  - Nonlinear probability model (conditional logit fixed effects) for default risk to avoid incidental parameter bias.

### IV. Main results — detailed findings and quantitative estimates
- Pooled and fixed effects estimates:
  - Distributed lag estimates: positive t-1 international commodity price shocks lead to a significant reduction in external debt.
  - Column (1) pooled panel (no fixed effects): significant negative t-1 effect at the 1% level.
  - Column (2) add country fixed effects: point estimates little changed.
  - Column (3) add year fixed effects: effect smaller in absolute size but negative and statistically significant at the 5% level.
  - Quantitative magnitude: a positive international commodity price shock of size 1 standard deviation significantly decreased on average external debt by over 0.04 standard deviations.
- Anticipatory effects:
  - Including period t+1 commodity price shocks: point estimate on period t+1 not statistically significant; no evidence of significant anticipatory effects.
- Dynamics of external debt:
  - Dynamic panel estimates (columns (6) and (7)) show persistence in external debt.
  - Estimated convergence coefficient: -0.120.
  - Implied half life in shocks to the level of external debt: around 5.4 years.
  - Dynamic estimates confirm significant negative t-1 effect of commodity price shocks on external debt.
- Democracy vs. autocracy (Table 2):
  - Significant negative effect of international commodity price shocks on external debt is particularly large and statistically significant for democracies.
  - Deep democracies (Polity2 > 6): a positive international commodity price shock of size 1 standard deviation leads to a significant reduction in external debt by over 0.24 standard deviations.
  - Democracies (Polity2 > 0): still a significant negative relationship, but quantitatively smaller.
  - Autocracies (Polity2 < 0 and deep autocracies Polity2 < -6): estimated relationship statistically insignificant and quantitatively near zero.
  - Chow test rejects equality of structural coefficients between autocracy and democracy samples.
- Executive constraints and political competition (Table 3 and related):
  - Countries with strong executive constraints and high political competition: windfalls lead to a statistically significant and quantitatively large reduction in external debt.
  - Countries with weak executive constraints and weak political competition: windfalls do not lead on average to a significant reduction in external debt.
- Government expenditures channel (Table 4):
  - Autocracies and countries with weak executive constraints/slack political competition: positive commodity price shocks lead to a highly significant and quantitatively large increase in total government expenditures.
  - Democracies and countries with strong executive constraints/high competition: positive commodity price shocks do not lead to a significant increase in total government expenditures.
- Rule of law channel (Table 5):
  - Democracies: the rule of law significantly increased following windfalls from international commodity price shocks.
  - Autocracies: the rule of law deteriorated, or at best did not change significantly; estimates imprecise but structural relationships across regimes are statistically different.
- Output effects (Table 6):
  - Positive international commodity price shocks associated with higher real per capita GDP growth in democracies and countries with strong executive constraints and high political competition.
  - Autocracies and countries with weak executive constraints/low competition: no significant effect on real per capita GDP growth despite large government spending response.
- Default risk (Table 7):
  - Conditional logit fixed effects estimates: structural relationship between commodity price shocks and risk of default differs significantly between democracies and autocracies.
  - Autocracies: risk of default significantly increases following windfalls from positive international commodity price shocks.
  - Democracies: estimated effect on default risk is negative; unable to reject zero due to larger standard errors in the smaller democracy sample, though point estimates are larger in absolute value than for autocracies.
- Robustness and additional checks:
  - No significant asymmetry between positive and negative commodity price shocks.
  - Quadratic (nonlinear) term in shocks insignificant.
  - No significant differential impact between price shocks of minerals vs. agricultural commodities.
  - Results robust when interacting shocks with per capita GDP level.

### V. Interpretation and policy implications
- Political institutions matter:
  - Democracies appear to constrain politicians from spending commodity windfalls on potentially wasteful or opaque expenditures, instead using windfalls to reduce external debt.
  - Autocracies tend to increase government expenditures with windfalls, which may be socially sub-optimal and does not translate into higher real per capita GDP.
- Voracity effect:
  - Evidence consistent with the voracity effect (Lane and Tornell, 1998; Tornell and Lane, 1999): revenue windfalls lead to disproportionate fiscal redistribution in countries with weak legal-political institutions.
  - Strong executive constraints attenuate the voracity effect; weak constraints amplify it.
- Default risk:
  - Windfalls reduce default risk in democracies but increase default risk in autocracies.
- Policy question for future research:
  - Whether fiscal rules could reduce procyclicality of government spending to commodity price shocks in autocracies remains an open empirical question; effectiveness depends on whether fiscal rules can be enforced or circumvented through creative accounting.

*Source: _wp1053 - References (PDF), content pages 3–14*

### REFERENCES

### _wp1053 - REFERENCES

### References cited
- Acemoglu, D., S. Johnson, and J. Robinson (2001). "The Colonial Origins of Comparative Development: An Empirical Investigation." American Economic Review 91: 1369-1401.
- Acemoglu, D., S. Johnson, and J. Robinson (2002). "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution." Quarterly Journal of Economics 117: 1231-1294.
- Alesina, A. and G. Tabellini (1989). "External Debt, Capital Flight, and Political Risk." Journal of International Economics 27: 199-220.
- Alesina, A., F. Campante, and G. Tabellini (2008). "Why is Fiscal Policy Often Procyclical?" Journal of the European Economic Association 6: 1006-1036.
- Beers, D. T., and J. Chambers (2003). "Sovereign Defaults: Heading Lower into 2004." Standard and Poors, New York.
- Bruckner, M. and A. Ciccone (2010). "International Commodity Price Shocks, Growth, and the Outbreak of Civil War in Sub-Saharan Africa." forthcoming Economic Journal.
- Canova, F. and E. Pappa (2006). "The Elusive Costs and Immaterial Gains of Fiscal Constraints." Journal of Public Economics 90: 1391-1414.
- Collier P., and B. Goderis (2007). "Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum". CSAE Working Paper Series No. 276.
- Deaton, A. and R. Miller (1995). International Commodity Prices, Macroeconomic Performance, and Politics in Sub-Saharan Africa. Princeton Studies in International Finance.
- Fatas, A. and I. Mihov (2006). "The Macroeconomic Effects of Fiscal Rules in the US States." Journal of Public Economics 90: 101-117.
- Heston, A., R. Summers and B. Aten (2009). "Penn World Table Version 6.3", Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, August 2009.
- Krugman, P. (1988). "Financing vs. Forgiving a Debt Overhang," Journal of Development Economics 29: 253-268.
- Lane, P. and A. Tornell (1996). "Power, Growth, and the Voracity Effect." Journal of Economic Growth 1: 213-241.
- Milesi-Ferretti, G. (2004). "Good, Bad or Ugly? On the Effects of Fiscal Rules with Creative Accounting." Journal of Public Economics 88: 377-394.
- Manzano, O., and R. Rigobon (2001). "Resource Curse or Debt Overhang?" NBER Working Paper No. 8390.
- Persson, T. (2002). "Do Political Institutions Shape Economic Policy." Econometrica 70: 883-905.
- Persson, T. and G. Tabellini (2003). The Economic Effects of Constitutions. MIT Press, Cambridge.
- Persson, T. and G. Tabellini (2006). "Democracy and Development. The Devil in Detail." American Economic Review Papers and Proceedings 96 (2): 319-324.
- Raddatz, C. (2007). "Are External Shocks Responsible for the Instability of Output in Low-Income Countries?" Journal of Development Economics 84:155-187.
- Tornell, A. and P. Lane (1999). "The Voracity Effect." American Economic Review 89: 22-46.
- Wooldridge, J. (2002). Econometric Analysis of Cross Section and Panel Data. Cambridge, Mass.: MIT Press.
- World Bank (2009). World Development Indicators (Washington D.C., World Bank).

### Empirical results — Commodity price shocks and external debt (Table 1)
- Dependent variable: the log-change of external debt.
- Estimation methods: least squares (columns (1)-(6)); system-GMM (column (7), Blundell and Bond, 1998).
- ComPrice Shock, t coefficients (LS columns): 
  - (1) -0.524 (t-value -1.03)
  - (2) -0.503 (t-value -0.94)
  - (3) -0.182 (t-value -0.38)
  - (4) -0.160 (t-value -0.34)
  - (5) -0.203 (t-value -0.43)
  - (6) -0.108 (t-value -0.21)
  - (7, SYS-GMM) -0.227 (t-value -0.40)
- ComPrice Shock, t-1 coefficients:
  - (1) -1.387*** (t-value -3.69)
  - (2) -1.377*** (t-value -3.62)
  - (3) -0.844** (t-value -1.97)
  - (4) -0.905** (t-value -2.06)
  - (5) -0.856** (t-value -1.97)
  - (6) -0.980** (t-value -2.48)
  - (7) -0.671* (t-value -1.79)
- ComPrice Shock, t-2 coefficients:
  - (1) 0.020 (t-value 0.07)
  - (2) 0.070 (t-value 0.24)
  - (3) -0.291 (t-value -0.89)
  - (4) -0.306 (t-value -0.90)
  - (5) -0.294 (t-value -0.90)
  - (6) -0.173 (t-value -0.40)
  - (7) -0.573 (t-value -1.23)
- Additional reported coefficients:
  - Debt Relief (column with specification including ComPrice Shock, t+1): -0.165*** (t-value -2.78)
  - Debt, t-1: -0.161*** (t-value -5.97) in one specification; -0.120*** (t-value -3.54) in another.
- Observations: mostly 2676; one column 2583.
- Notes: t-values based on Huber robust standard errors clustered at country level. Significance markers: * 90 percent, ** 95 percent, *** 99 percent.

### Heterogeneity by regime type — Commodity price shocks, democracy, and external debt (Table 2)
- Dependent variable: the log-change of external debt. Method: least squares with country and year fixed effects.
- ComPrice Shock, t-1 coefficients:
  - Deep Democracy (Polity2 >6, column (1)): -6.103*** (t-value -2.64)
  - Democracy (Polity2 >0, column (2)): -1.676** (t-value -2.16)
  - Autocracy (Polity2 <=0, column (3)): -0.098 (t-value -0.18)
  - Deep Autocracy (Polity2 <-6, column (4)): -0.024 (t-value -0.03)
- Observations: 409; 1221; 1445; 357 respectively.
- Chow test p-values reported on equality with column (1): [0.017], [0.007], [0.008] (reported in bracketed form in table).

### Executive constraints and political competition (Table 3)
- Dependent variable: the log-change of external debt. Method: least squares with country and year fixed effects.
- ComPrice Shock, t-1 coefficients:
  - Strong Executive Constraints (column (1)): -1.778** (t-value -2.24)
  - Weak Executive Constraints (column (2)): 0.153 (t-value 0.28)
  - Strong Political Competition (column (3)): -1.797** (t-value -2.04)
  - Weak Political Competition (column (4)): -0.081 (t-value -0.16)
- Observations: 1283; 1393; 1172; 1504.
- Chow test p-values: [0.039] (comparison for column (1)); [0.085] (comparison for column (3)).

### Political institutions and government expenditures (Table 4)
- Dependent variable: the log-change of total government expenditures. Method: least squares with country and year fixed effects.
- ComPrice Shock, t-1 coefficients:
  - Democracy (column (1)): -0.020 (t-value -0.09)
  - Autocracy (column (2)): 0.918*** (t-value 3.89)
  - Strong Executive Constraints (column (3)): 0.047 (t-value 0.24)
  - Weak Executive Constraints (column (4)): 0.856*** (t-value 3.66)
  - Strong Political Competition (column (5)): 0.085 (t-value 0.55)
  - Weak Political Competition (column (6)): 0.776*** (t-value 2.86)
- Observations: 2314; 2269; 2459; 2124; 2415; 2168.
- Chow test p-values reported: [0.004], [0.008], [0.004] for respective comparisons.

### Political institutions and the rule of law (Table 5)
- Dependent variable: the change in the ICRG rule of law variable. Method: least squares with country and year fixed effects.
- ComPrice Shock, t-1 coefficients:
  - Democracy (column (1)): 3.725** (t-value 2.38)
  - Autocracy (column (2)): -0.401 (t-value -0.46)
  - Strong Executive Constraints (column (3)): 3.836** (t-value 2.43)
  - Weak Executive Constraints (column (4)): -0.572 (t-value -0.67)
  - Strong Political Competition (column (5)): 4.321** (t-value 2.44)
  - Weak Political Competition (column (6)): -0.494 (t-value -0.65)
- Observations: 1256; 1214; 1334; 1136; 1214; 1256.
- Chow test p-values reported: [0.020], [0.013], [0.011] for respective comparisons.

### Political institutions and economic growth (Table 6)
- Dependent variable: the log-change of real per capita GDP. Method: least squares with country and year fixed effects.
- ComPrice Shock, t-1 coefficients:
  - Democracy (column (1)): 0.269* (t-value 1.83)
  - Autocracy (column (2)): -0.317 (t-value -1.23)
  - Strong Executive Constraints (column (3)): 0.275* (t-value 1.84)
  - Weak Executive Constraints (column (4)): -0.329 (t-value -1.28)
  - Strong Political Competition (column (5)): 0.300** (t-value 2.19)
  - Weak Political Competition (column (6)): -0.341 (t-value -1.32)
- Observations: 2314; 2269; 2459; 2124; 2267; 2316.
- Chow test p-values reported: [0.045], [0.040], [0.027] for respective comparisons.

### Political institutions and the risk of default on external debt (Table 7)
- Dependent variable: indicator variable equal to 1 if the country defaulted on external debt. Method: conditional logit fixed effects (maximum likelihood).
- ComPrice Shock, t-1 coefficients (Logit FE):
  - Democracy (column (1)): -12.925 (t-value -1.00)
  - Autocracy (column (2)): 9.759* (t-value 1.81)
  - Strong Executive Constraints (column (3)): -15.984 (t-value -1.36)
  - Weak Executive Constraints (column (4)): 16.009*** (t-value 2.69)
  - Strong Political Competition (column (5)): -14.278 (t-value -1.17)
  - Weak Political Competition (column (6)): 10.525** (t-value 1.97)
- Observations: 640; 1174; 708; 1106; 638; 1176.
- Chow test p-values reported: [0.059], [0.007], [0.016] for respective comparisons.

*Content unit: _wp1053 - REFERENCES*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2010/_wp1053.pdf_