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Revisiting the commodity curse: a financial perspective

Enrique Alberola and Gianluca Benigno

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study the response of a three-sector commodity-exporter small open economy to a commodity price boom. When the economy has access to international borrowing and lending, a temporary commodity price boom brings about the standard wealth effect that stimulates domand and has long-run implications on the sectoral allocation of labor. If dynamic productivity gains are concentrated in the traded goods sector, the commodity boom crowds out the traded sector and delays convergence to the world technology frontier. Financial openness by stimulating current demand, amplifies the crowding out effect and may even lead to a growth trap, in which no resources are allocated to the traded sector. From a normative point of view, our analysis suggests that capital account management policies could be welfare improving in those circumstances.

Keywords: Commodity Resource Curse; Dutch-Disease; Financial Openness; Endogenous Growth (search for similar items in EconPapers)
JEL-codes: F32 F36 F41 F43 O13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-opm
Date: 2017-05
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Published in Journal of International Economics, May, 2017, 108, pp. S87-S106. ISSN: 0022-1996

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Related works:
Journal Article: Revisiting the commodity curse: A financial perspective (2017) Downloads
Working Paper: Revisiting the commodity curse: a financial perspective (2017) Downloads
Working Paper: Revisiting the Commodity Curse: A Financial Perspective (2017) Downloads
Working Paper: Revisiting the commodity curse: A financial perspective (2017) Downloads
Working Paper: Revisiting the Commodity Curse: A Financial Perspective (2017) Downloads
Chapter: Revisiting the Commodity Curse: A Financial Perspective (2016)
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