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Author/Editor:
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Cavalcanti, Tiago V. de V. ; Mohaddes, Kamiar ; Raissi, Mehdi
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Publication Date:
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January 01, 2012
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Electronic Access:
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Free Full text
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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
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Summary:
This paper studies the impact of the level and volatility of the commodity terms of trade on economic growth, as well as on the three main growth channels: total factor productivity, physical capital accumulation, and human capital acquisition. We use the standard system GMM approach as well as a cross-sectionally augmented version of the pooled mean group (CPMG) methodology of Pesaran et al. (1999) for estimation. The latter takes account of cross-country heterogeneity and cross-sectional dependence, while the former controls for biases associated with simultaneity and unobserved country-specific effects. Using both annual data for 1970-2007 and five-year non-overlapping observations, we find that while commodity terms of trade growth enhances real output per capita, volatility exerts a negative impact on economic growth operating mainly through lower accumulation of physical capital. Our results indicate that the negative growth effects of commodity terms of trade volatility offset the positive impact of commodity booms; and export diversification of primary commodity abundant countries contribute to faster growth. Therefore, we argue that volatility, rather than abundance per se, drives the "resource curse" paradox.
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Order a print copy
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Series:
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Working Paper No. 12/12
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Subject(s):
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Commodity price fluctuations | Commodity prices | Economic growth | Economic models | Productivity | Terms of trade
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Author's Keyword(s):
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Growth | resource curse | commodity prices | volatility. |
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English
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Publication Date:
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January 01, 2012
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Format:
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Paper
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Stock No:
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WPIEA2012012
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Pages:
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44
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Price:
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US$18.00 )
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Please address any questions about this title to
publications@imf.org
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