Commodity Price Volatility, Democracy and Economic Growth
International Monetary Fund (IMF)
University of Iceland - Faculty of Economics and Business Administration; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)
October 27, 2011
CESifo Working Paper Series No. 3619
We use a new dataset on non-resource GDP to examine the impact of commodity price volatility on economic growth in a panel of up to 158 countries during the period 1970-2007. Our main finding is that commodity price volatility leads to a significant increase in non-resource GDP growth in democracies, but to no significant increase in autocracies. To explain this result, we show that increased commodity price volatility leads to a statistically significant and quantitatively large increase in net national saving in democracies. In autocracies, on the other hand, net national saving decreased significantly. Our results hold true when using indicators capturing the quality of economic institutions in lieu of indicators of political institutions.
Number of Pages in PDF File: 21
Keywords: commodity prices, volatility, democracy, economic growth
JEL Classification: D740, D630, F320, Q330
Date posted: October 27, 2011
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