Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Emerging markets are more volatile and face different types of shocks, in size and nature, compared to their developed counterparts. Accurate identification of the stochastic properties of shocks is difficult. We show evidence suggesting that uncertainty about the underlying stochastic process is present in commodity prices. In addition, we build a dynamic stochastic general equilibrium model with informational frictions, which explicitly considers uncertainty about the nature of shocks. When formulating expectations, the economy assigns some probability to the shocks being temporary even if they are actually permanent. Parameter instability in the stochastic process implies that optimal saving levels (debt holdings) should be higher (lower) compared to a process with fixed parameters. Imperfect information about the nature of shocks matters when commodity GDP shares are high. Thus, economic policies based on misperception of the underlying regime can lead to substantial over/under saving with important associated costs.

Prices --- Saving and investment --- Accumulation, Capital --- Capital accumulation --- Capital formation --- Investment and saving --- Saving and thrift --- Capital --- Supply-side economics --- Wealth --- Investments --- Econometric models. --- Investments: Commodities --- Econometrics --- Macroeconomics --- Commodity Markets --- Macroeconomics: Consumption --- Saving --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Investment & securities --- Econometrics & economic statistics --- Commodity prices --- Commodities --- Consumption --- Markov-switching models --- Commodity price fluctuations --- Commercial products --- Economics --- Econometric models --- Chile

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

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.

Economic stabilization --- Economic development --- Adjustment, Economic --- Business stabilization --- Economic adjustment --- Stabilization, Economic --- Economic policy --- Political aspects. --- Public Finance --- Natural Resources --- Macroeconomics --- Economic Development: Agriculture --- Energy --- Environment --- Other Primary Products --- Fiscal Policies and Behavior of Economic Agents: General --- Multiple or Simultaneous Equation Models: Models with Panel Data --- National Government Expenditures and Related Policies: General --- Fiscal Policy --- Agricultural and Natural Resource Economics --- Environmental and Ecological Economics: General --- Commodity Markets --- Public finance & taxation --- Environmental management --- Expenditure --- Fiscal policy --- Natural resources --- Commodity price fluctuations --- Prices --- Expenditures, Public --- Norway