Terms of Trade Volatility, Government Spending Cyclicality, and Economic Growth

24 Pages Posted: 16 Jun 2016

See all articles by Markus Brueckner

Markus Brueckner

The Australian National University

Francisco Carneiro

The World Bank

Multiple version iconThere are 2 versions of this paper

Date Written: June 15, 2016

Abstract

This paper presents estimates of the effects that terms of trade volatility has on real GDP per capita growth. Based on 5-year non-overlapping panel data comprising 175 countries during 1980-2010, the paper finds that terms of trade volatility has significant adverse effects on economic growth in countries with procyclical government spending; in countries where government spending is countercyclical terms of trade volatility has no significant effect on growth. Conditional on the mediating role of government spending cyclicality, the GDP share of domestic credit to the private sector has no significant effect on the relationship between growth and terms of trade volatility.

Suggested Citation

Brueckner, Markus and Carneiro, Francisco Galrao, Terms of Trade Volatility, Government Spending Cyclicality, and Economic Growth (June 15, 2016). CAMA Working Paper No. 36/2016 . Available at SSRN: https://ssrn.com/abstract=2796395 or http://dx.doi.org/10.2139/ssrn.2796395

Markus Brueckner (Contact Author)

The Australian National University ( email )

Canberra, Australian Capital Territory 2601
Australia

Francisco Galrao Carneiro

The World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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