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

15 Pages Posted: 4 Oct 2017

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: November 2017

Abstract

This paper presents estimates of the effects that terms of trade volatility has on real gross domestic product (GDP) per capita growth. Based on 5‐year nonoverlapping panel data comprising 175 countries during 1980 to 2010, the paper finds that terms of trade volatility has significant negative 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.

JEL Classification: H1, F4, O4

Suggested Citation

Brueckner, Markus and Carneiro, Francisco Galrao, Terms of Trade Volatility, Government Spending Cyclicality, and Economic Growth (November 2017). Review of International Economics, Vol. 25, Issue 5, pp. 975-989, 2017. Available at SSRN: https://ssrn.com/abstract=3047551 or http://dx.doi.org/10.1111/roie.12291

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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