Revisiting the Commodity Curse: A Financial Perspective

Enrique Alberola and Gianluca Benigno

No 23169, NBER Working Papers from National Bureau of Economic Research, Inc

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 demand and has long-run implications on the sectoral allocation of labour. 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.

JEL-codes: F32 F36 F41 F43 O16 (search for similar items in EconPapers)
Date: 2017-02
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Published as Revisiting the Commodity Curse: A Financial Perspective , Enrique Alberola, Gianluca Benigno. in NBER International Seminar on Macroeconomics 2016 , Clarida, Reichlin, and Devereux. 2017
Published as Alberola, Enrique & Benigno, Gianluca, 2017. "Revisiting the commodity curse: A financial perspective," Journal of International Economics, Elsevier, vol. 108(S1), pages 87-106.

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