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| Adil Mohommad and Mehdi Raissi |
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| ''The long run effects of commodity price volatility on growth and inflation: A cross-country panel estimation'' |
| ( 2025, Vol. 45 No.2 ) |
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| We study the impact of commodity terms of trade (CToT) volatility on long-term economic growth and its drivers as well as on inflation, in a sample of 118 countries over 1970-2019, including 69 commodity exporters. Our econometric approaches account for bi-directional feedback effects, cross-country heterogeneity, and cross-sectional dependences. We find that CToT volatility exerts a negative impact on long-term economic growth, mainly through lower capital accumulation. This offsets the positive impact on growth from commodity price booms (especially in resource-rich economies). Furthermore, we observe that higher CToT volatility leads to greater volatility in inflation rather than structurally higher inflation. |
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| Keywords: Terms of trade, volatility, commodity prices, growth, inflation |
JEL: E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
F1 - Trade: General |
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| Manuscript Received : Jan 24 2025 | | Manuscript Accepted : Jun 30 2025 |
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