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Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum

45 Pages Posted: 16 Sep 2009  

Paul Collier

University of Oxford - Department of Economics

Benedikt Goderis

The Netherlands Institute for Social Research|SCP

Date Written: June 5, 2008

Abstract

Currently, evidence on the ‘resource curse’ yields a conundrum. While there is much cross-section evidence to support the curse hypothesis, time series analyses using vector autoregressive (VAR) models have found that commodity booms raise the growth of commodity exporters. This paper adopts panel cointegration methodology to explore longer term effects than permitted using VARs. We find strong evidence of a resource curse. Commodity booms have positive short-term effects on output, but adverse long-term effects. The long-term effects are confined to “high-rent”, non-agricultural commodities. We also find that the resource curse is avoided by countries with sufficiently good institutions. We test the channels of the resource curse proposed in the literature and find that it is explained by real exchange rate appreciation and public and private consumption. Our findings have important implications for non-agricultural commodity exporters with weak institutions, especially in light of the current unprecedented boom in global commodity prices.

Keywords: commodity prices, natural resource curse, growth

JEL Classification: O13, O47, Q33

Suggested Citation

Collier, Paul and Goderis, Benedikt, Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum (June 5, 2008). Available at SSRN: https://ssrn.com/abstract=1473716 or http://dx.doi.org/10.2139/ssrn.1473716

Paul Collier

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

Benedikt Goderis (Contact Author)

The Netherlands Institute for Social Research|SCP ( email )

Rijnstraat 50
The Haag, 2515
Netherlands

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