Effects of commodity price windfalls on external debt: The role of political institutions
Rabah Arezki, Markus Brückner 15 June 2012
Booming commodity prices generate large foreign currency inflows for exporting nations. This column argues that in countries with executive constraints and political competition windfalls from commodity booms lead to a significant reduction in external debt. In autocratic regimes, on the other hand, the windfalls are used to increase consumption expenditures.
Booming commodity prices have generated large foreign currency inflows for commodity exporting nations. Such inflows, however, are not always associated with positive outcomes for the commodity exporters. Phenomena such as corruption (Bhattacharyya and Hodler 2009) and the ‘natural resource curse’ (Brunnschweiler and Bulte 2012) often plague nations rich in natural resources. The political impact of large foreign currency inflows are important (Brollo et al. 2010), as is the optimal management of the revenue (Van der Ploeg and Venables 2011).
Development Macroeconomic policy
resource curse, political regimes, debt
Political regimes and international trade
Toke S. Aidt, Martin Gassebner 16 December 2008
Are autocracies less integrated in the world economy than democracies? This column provides an overview of recent research on this question and argues that autocratic states trade less with the rest of the world than democracies. This may be one reason why many autocracies have failed to develop economically.
Two hundred years ago, David Ricardo formulated the principle of comparative advantage and pointed to the associated economic benefits of trade integration. The practical value of this insight has withstood the test of time. It is as apparent in the historical record - trade integration played a major role during the first age of globalisation - as it is from the numerous recent examples of countries that have used international trade to lift themselves out of poverty.
Institutions and economics International trade
globalisation, autocracies, political regimes, trade integration