TFP Growth and Commodity Prices in Emerging Economies

37 Pages Posted: 24 Mar 2017

Date Written: March 24, 2017

Abstract

In this paper we aim at empirically testing cross-country impacts of commodity price shocks to aggregate TFP growth for a sample of emerging economies. Under a growth accounting framework, we estimate country-specific TFP growth (1992-2014) and select the attendant robust determinants by means of a Bayesian Model Averaging (BMA) approach. To identify the effects of structural shocks, we propose a Bayesian panel VAR model and calculate cyclically adjusted TFP growth net of demand shocks (i.e. output gap) and commodity prices. Our results suggest that: i) the relationship of commodity prices to TFP growth has been very high in small commodity-exporting economies (i.e. an increase of 10% in commodity prices is associated with a sizable expansion of TFP growth in a year for an average commodity exporter); ii) although our evidence is not sufficient to empirically distinguish among theoretical explanations, our results favour an interpretation that weights short-term effects of commodity prices on productivity, either through transitional dynamics to the manufacturing sector or through mismeasurement of TFP; and iii) cyclically adjusted TFP growth highlights the importance of negative supply shocks in commodity-exporting countries. All in all, much of the increase in TFP growth in the last decade was related to a favourable cyclical environment, a result with potentially significant policy implications for commodity-dependent economies.

Keywords: total factor productivity, commodity prices, Bayesian model averaging, panel VAR

JEL Classification: O47, Q02, C11, C23

Suggested Citation

Kataryniuk, Iván and Martinez-Martin, Jaime, TFP Growth and Commodity Prices in Emerging Economies (March 24, 2017). Banco de Espana Working Paper No. 1711, Available at SSRN: https://ssrn.com/abstract=2940195 or http://dx.doi.org/10.2139/ssrn.2940195

Iván Kataryniuk (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

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