The Effects of Volatility, Fiscal Policy Cyclicality and Financial Development on Growth : Evidence for the Eastern Caribbean

Brü ; eckner, Markus ; Carneiro, Francisco

World Bank, Washington, DC

关键词: GROWTH RATES;    OUTPUT VOLATILITY;    MONETARY POLICY;    CAPITAL MARKETS;    DEPOSIT;   

DOI  :  10.1596/1813-9450-7507
RP-ID  :  WPS7507

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper presents estimates of theeffects that terms of trade volatility has on growth of realgross domestic product per capita. Based on five-yearnon-overlapping panel data comprising 175 countries during1980–2010, the paper finds that: (i) in model specificationsthat do not include country fixed effects, terms of tradevolatility has a significant negative average effect oneconomic growth; (ii) once country fixed effects areincluded in the model, the average effect of terms of tradevolatility on economic growth is not significantly differentfrom zero; (iii) robust to the inclusion of country fixedeffects, terms of trade volatility has significantly adverseeffects on economic growth in countries with pro-cyclicalfiscal policy; and (iv) in model specifications that do notinclude country fixed effects, financial development is asignificant mediating factor with regard to the effect thatterms of trade volatility has on economic growth, however,the significance of this effect vanishes once country fixedeffects are included in the model. The paper also exploresthese relationships for the Organization of EasternCaribbean States region. A key conclusion from the researchis that countercyclical fiscal policy and deeper financialmarkets will have particularly high payoffs in reducing theadverse growth effects of terms of trade volatility in theOrganization of Eastern Caribbean States region.