IMF Working Papers

International Commodity Price Shocks, Democracy, and External Debt

By Markus Bruckner, Rabah Arezki

March 1, 2010

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Markus Bruckner, and Rabah Arezki. International Commodity Price Shocks, Democracy, and External Debt, (USA: International Monetary Fund, 2010) accessed November 13, 2024
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 examine the effects that international commodity price shocks have on external debt using panel data for a world sample of 93 countries spanning the period 1970-2007. Our main finding is that positive commodity price shocks lead to a significant reduction in the level of external debt in democracies, but to no significant reduction in the level of external debt in autocracies. To explain this result, we show that positive commodity price shocks lead to a statistically significant and quantitatively large increase in total government expenditures in autocracies. In democracies on the other hand government expenditures did not increase significantly. We also document that following positive windfalls from international commodity price shocks the risk of default on external debt decreased in democracies, but increased significantly in autocracies.

Subject: Commodity price shocks, Commodity prices, Competition, Expenditure, External debt

Keywords: Commodity, Commodity price shock, Debt, Price, WP

Publication Details

  • Pages:

    22

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2010/053

  • Stock No:

    WPIEA2010053

  • ISBN:

    9781451963427

  • ISSN:

    1018-5941