Resource Windfalls, Macroeconomic Stability and Growth: The Role of Political Institutions

By Kazim Kazimov, Kirk Hamilton, Rabah Arezki

June 1, 2011

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Kazim Kazimov, Kirk Hamilton, and Rabah Arezki. Resource Windfalls, Macroeconomic Stability and Growth: The Role of Political Institutions, (USA: International Monetary Fund, 2011) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We use a new dataset on non-resource GDP to examine the performance of commodity-exporting countries in terms of macroeconomic stability and economic growth in a panel of up to 129 countries during the period 1970-2007. Our main findings are threefold. First, we find that overall government spending in commodity-exporting countries has been procyclical. Second, we find that resource windfalls initially crowd out non-resource GDP which then increases as a result of the fiscal expansion. Third, we find that in the long run resource windfalls have negative effects on non-resource sector GDP growth. Yet, the effects turn out to be statistically insignificant when controlling for government spending. Both the effects of resource windfalls on macroeconomic stability and economic growth are moderated by the quality of political institutions.

Subject: Commodity price fluctuations, Environment, Expenditure, Fiscal policy, Natural resources, Prices

Keywords: Central Africa, Commodity, Commodity price fluctuations, Country, East Africa, Economic growth, Fiscal policy, GDP, Macroeconomic stability, Middle East, Natural resources, Non-resource GDP, Resource curse, Resource windfall, Standard deviation, Sub-Saharan Africa, Unit resource rent, Windfall index, Windfall shock, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/142
Stock No:

WPIEA2011142
ISBN:

9781455266432
ISSN:

1018-5941

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