Do Sovereign Wealth Funds Dampen the Negative Effects of Commodity Price Volatility?

22 Pages Posted: 14 Feb 2017

See all articles by Kamiar Mohaddes

Kamiar Mohaddes

University of Cambridge - Judge Business School; University of Cambridge - King's College, Cambridge

Mehdi Raissi

International Monetary Fund (IMF) - Fiscal Affairs Department

Multiple version iconThere are 2 versions of this paper

Date Written: 2017-02-01

Abstract

This paper studies the impact of commodity terms of trade (CToT) volatility on economic growth (and its sources) in a sample of 69 commodity-dependent countries, and assesses the role of Sovereign Wealth Funds (SWFs) and quality of institutions in their long-term growth performance. Using annual data over the period 1981-2014, we employ the Cross-Sectionally augmented Autoregressive Distributive Lag (CS-ARDL) methodology for estimation to account for cross-country heterogeneity, cross-sectional dependence, and feedback effects. We find that while CToT volatility exerts a negative impact on economic growth (operating through lower accumulation of physical capital and lower TFP), the average impact is dampened if a country has a SWF and better institutional quality (hence a more stable government expenditure).

JEL Classification: C23, E32, F43, O13, O40

Suggested Citation

Mohaddes, Kamiar and Raissi, Mehdi, Do Sovereign Wealth Funds Dampen the Negative Effects of Commodity Price Volatility? (2017-02-01). Globalization and Monetary Policy Institute Working Paper No. 304, Available at SSRN: https://ssrn.com/abstract=2916612 or http://dx.doi.org/10.24149/gwp304

Kamiar Mohaddes (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 (0)1223 766933 (Phone)

HOME PAGE: http://https://www.mohaddes.org/

University of Cambridge - King's College, Cambridge ( email )

King's Parade
Cambridge, CB2 1ST
United Kingdom
+44 (0)1223 766933 (Phone)

HOME PAGE: http://https://www.mohaddes.org/

Mehdi Raissi

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

HOME PAGE: http://https://sites.google.com/site/mehdiraissi/

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