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

26 Pages Posted: 22 Jun 2011

See all articles by Rabah Arezki

Rabah Arezki

World Bank - African Development Bank

Kazim Kazimov

International Monetary Fund (IMF); Georgetown University

Kirk Hamilton

World Bank

Multiple version iconThere are 2 versions of this paper

Date Written: June 2011

Abstract

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.

Suggested Citation

Arezki, Rabah and Kazimov, Kazim and Hamilton, Kirk, Resource Windfalls, Macroeconomic Stability and Growth: The Role of Political Institutions (June 2011). IMF Working Paper No. 11/142, Available at SSRN: https://ssrn.com/abstract=1869551

Rabah Arezki (Contact Author)

World Bank - African Development Bank ( email )

15 Avenue du Ghana
P.O.Box 323-1002
Tunis-Belvedère
Tunisia

Kazim Kazimov

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Georgetown University ( email )

Washington, DC 20057
United States

Kirk Hamilton

World Bank ( email )

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

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