Resource Windfalls and Emerging Market Sovereign Bond Spreads: The Role of Political Institutions
July 1, 2010
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Summary
We examine the effect that revenue windfalls from international commodity price shocks have on sovereign bond spreads using panel data for 30 emerging market economies during the period 1997-2007. Our main finding is that positive commodity price shocks lead to a significant reduction in the sovereign bond spread in democracies, but to a significant increase in the spread in autocracies. To explain our finding we show that, consistent with the political economy literature on the resource curse, revenue windfalls from international commodity price shocks significantly increased real per capita GDP growth in democracies, while in autocracies GDP per capita growth decreased.
Subject: Commodity price shocks, Commodity prices, Emerging and frontier financial markets, Financial institutions, Financial markets, Financial services, Prices, Sovereign bonds, Yield curve
Keywords: commodity, commodity export shock, commodity price booms, commodity price data, commodity price shock, Commodity Price Shocks, Commodity prices, Emerging and frontier financial markets, export price shock, Global, Political Institutions, price, Sovereign Bond Spread, Sovereign bonds, UNCTAD commodity statistics, WP, Yield curve
Pages:
11
Volume:
2010
DOI:
Issue:
179
Series:
Working Paper No. 2010/179
Stock No:
WPIEA2010179
ISBN:
9781455202133
ISSN:
1018-5941
