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Do sovereign wealth funds dampen the negative effects of commodity price volatility?

Accepted version
Peer-reviewed

Type

Article

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Authors

Raissi, M 

Abstract

This paper studies the impact of commodity terms of trade (CToT) volatility on economic growth (and its sources) in a sample of 69 commodity-dependent countries, and assesses the role of Sovereign Wealth Funds (SWFs) and quality of institutions in their long-term growth performance. Using annual data over the period 1981–2014, we employ the Cross-Sectionally augmented Autoregressive Distributive Lag (CS-ARDL) methodology for estimation to account for cross-country heterogeneity, cross-sectional dependence, and feedback effects. We find that while CToT volatility exerts a negative impact on economic growth (operating through lower accumulation of physical capital and lower TFP), the average impact is dampened if a country has a SWF and better institutional quality (hence a more stable government expenditure).

Description

Keywords

economic growth, commodity prices, volatility, sovereign wealth funds

Journal Title

Journal of Commodity Markets

Conference Name

Journal ISSN

2405-8513
2405-8505

Volume Title

8

Publisher

Elsevier
Sponsorship
Kamiar Mohaddes acknowledges financial support from the Economic Research Forum (ERF).
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