Do Sovereign Wealth Funds Dampen the Negative Effects of Commodity Price Volatility?

Kamiar Mohaddes and Mehdi Raissi

No 1106, Working Papers from Economic Research Forum

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).

Pages: 21 pages
Date: 2017-08-06, Revised 2000-08-06
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Related works:
Journal Article: Do sovereign wealth funds dampen the negative effects of commodity price volatility? (2017)
Working Paper: Do Sovereign Wealth Funds Dampen the Negative Effects of Commodity Price Volatility? (2017)
Working Paper: Do sovereign wealth funds dampen the negative effects of commodity price volatility? (2017)
Working Paper: Do Sovereign Wealth Funds Dampen the Negative Effects of Commodity Price Volatility? (2017)
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