Financial Resource Curse in Resource-Rich Countries
IMF Working Papers, July 19, 2017
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- Financial Resource Curse in Resource-Rich Countries
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Bibliographic details
- Authors: Montfort Mlachila, Rasmané Ouedraogo
- Published: July 19, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484310144.001
Summary and main finding
- Research question: Why do commodity-dependent developing countries have typically lower levels of financial development than their peers?
- Core argument: The main cause is shocks in commodity prices.
- Principal result: Strong evidence of a "financial development resource curse" operating through the channel of commodity price shocks, after controlling for other explanations found in the literature.
- Mitigation channel: The impact of these shocks can be mitigated through good quality of governance.
Methodology and data
- Sample: 68 commodity-rich developing countries.
- Sample period: between 1980 and 2014.
- Empirical approach: Tests of the hypothesis controlling for other explanations proposed in the literature (specific methods and control variables are described in the paper).
Robustness and scope
- Robustness checks reported:
- Robust to different types of commodities.
- Robust to the nature of the shocks.
- Robust across various indicators of financial development.
- Financial development indicators referenced in subject keywords: Bank credit, Bank deposits, Financial sector development.
Policy implications and recommendations
- Main policy implication: Strengthening quality of governance can mitigate the adverse effects of commodity price shocks on financial development.
- Policy focus areas implied by findings and keywords:
- Governance improvements to reduce vulnerability to commodity price shocks.
- Policies targeting financial sector resilience amid export concentration and price volatility.
Content in this bundle
- Appendix I: Sample and Descriptive Statistics