Premium
Terms of trade volatility, government spending cyclicality, and economic growth
Author(s) -
Brueckner Markus,
Carneiro Francisco
Publication year - 2017
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12291
Subject(s) - economics , volatility (finance) , gross domestic product , government spending , real gross domestic product , monetary economics , per capita , panel data , international economics , terms of trade , macroeconomics , econometrics , population , demography , sociology , welfare , market economy
This paper presents estimates of the effects that terms of trade volatility has on real gross domestic product (GDP) per capita growth. Based on 5‐year nonoverlapping panel data comprising 175 countries during 1980 to 2010, the paper finds that terms of trade volatility has significant negative effects on economic growth in countries with procyclical government spending. In countries where government spending is countercyclical, terms of trade volatility has no significant effect on growth. Conditional on the mediating role of government spending cyclicality, the GDP share of domestic credit to the private sector has no significant effect on the relationship between growth and terms of trade volatility.