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Commodity Windfalls, Polarization, and Net Foreign Assets: Panel Data Evidenceon the Voracity Effect

Markus Brückner () and Rabah Arezki ()

No 10/209, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the effect that windfalls from international commodity price booms have on net foreign assets in a panel of 145 countries during the period 1970-2007. The main finding is that windfalls from international commodity price booms lead to a significant increase in net foreign assets, but only in countries that are homogeneous. In polarized countries, net foreign assets significantly decreased. To explain this asymmetry, the paper shows that in polarized countries commodity windfalls lead to large increases in government spending, political corruption, and the risk of expropriation, with no overall effect on GDP per capita growth. The paper's findings are consistent with theoretical models of the current account that have a built-in voracity effect.

Keywords: Asset management; Cross country analysis; Current account surpluses; Current account; Commodities; Commodity price fluctuations; Economic models; Political economy; Government expenditures; Time series; Commodity Windfalls, Net Foreign Assets, Polarization, foreign assets, net foreign asset, foreign asset, net foreign asset position, Equity, Justice, Inequality, and Other Normative Criteria and Measurement, Resource Booms, (search for similar items in EconPapers)
Date: 2010-09-01
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Related works:
Journal Article: Commodity windfalls, polarization, and net foreign assets: Panel data evidence on the voracity effect (2012) Downloads
Working Paper: Commodity Windfalls, Polarization, and Net Foreign Assets:Panel Data Evidence on the Voracity Effect (2012) Downloads
Working Paper: Commodity Windfalls, Polarization, and Net Foreign Assets: Panel Data Evidence on the Voracity Effect (2011) Downloads
Working Paper: Commodity Windfalls, Polarization, and Net Foreign Assets: Panel Data Evidence on the Voracity Effect (2011) Downloads
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