Dependency revisited: Commodities, commodity-related capital flows and growth models in emerging economies

Michael Schedelik, Andreas Nölke, Christian May and Alexandre Gomes

No 201/2022, IPE Working Papers from Berlin School of Economics and Law, Institute for International Political Economy (IPE)

Abstract: The growth model perspective has provided avenues for bridging Comparative and International Political Economy, mainly with regard to the global financial crisis and developments within the Eurozone. This article aims to contribute to this endeavor by highlighting the joint effects of capital flows and commodity price swings on growth models in emerging capitalist economies. While the literature on dependent financialization has primarily focused on debt-led growth in the Global South, we spell out the negative implications of commodity-based export-led growth. To this end, we first present a stylized depiction of commodity dependence and provide descriptive statistical evidence of its global prevalence. Subsequently, we trace the co-movement of capital flows to emerging economies and commodity prices. We argue that this 'commodity-finance nexus' reinforces the pro-cyclical nature of commodity-based growth, financial volatility, and the vulnerability to global boombust-cycles. Furthermore, we demonstrate that the conventional method for establishing growth models by calculating the relative contributions to growth is ill-suited to capture the commodity-based export-led growth model of highly commodity-dependent economies. Finally, we identify commodity price movements and fiscal policies as major drivers of growth, with an important role for domestic politics as an intervening variable.

Keywords: Commodity prices; capital flows; dependent financialization; growth models; emerging economies; boom-bust-cycles; export-led growth; fiscal policy; dependency (search for similar items in EconPapers)
JEL-codes: O13 O47 Q33 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-fdg, nep-hme and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ipewps:2012022

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