The Effects on Growth of Commodity Price Uncertainty and Shocks
The author estimates the effects on growth of commodity price shocks, and uncertainty within an established empirical growth model. Ex-post shocks, and ex-ante uncertainty have been treated in the empirical literature as if they were synonymous. Bu...
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| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2000/09/693025/effects-growth-commodity-price-uncertainty-shocks http://hdl.handle.net/10986/19788 |
| Summary: | The author estimates the effects on
growth of commodity price shocks, and uncertainty within an
established empirical growth model. Ex-post shocks, and
ex-ante uncertainty have been treated in the empirical
literature as if they were synonymous. But they are distinct
concepts, and it is both theoretically, and empirically
inappropriate to treat them as synonymous. He shows that the
interaction between policy, and aid is robust to the
inclusion of variables capturing commodity price movements.
More important, his approach departs in three ways from
earlier empirical studies of the subject: 1) It deals with
issues of endogeneity, without incurring an excessive loss
of efficiency. 2) It defines the dependent variable to allow
an assessment of the longer-term implications of temporary
trade shocks. 3) It imposes no priors on how commodity price
movements affect growth, but compares and contrasts a range
of competing shock, and uncertainty specifications. The
author resolves the disagreement about the long-run effect
of positive shocks on growth, finding that positive shocks
have no long-run impact on growth (that windfalls from trade
shocks do not translate into sustainable increases in
income). He shows that negative shocks have large, highly
significant, and negative effects on growth, but that
commodity price uncertainty does not affect growth. |
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