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Title:Commodity windfalls, polarization, and net foreign assets: Panel data evidence on the voracity effect PDF Logo
Authors:Arezki, Rabah
Brückner, Markus
Issue Date:2011
Series/Report no.:CESifo working paper: Monetary Policy and International Finance 3656
Abstract:This paper examines the effects that windfalls from international commodity price booms have on net foreign assets in a panel of 145 countries during the period 1970-2007. The main finding is that windfalls from international commodity price booms lead to a significant increase in net foreign assets, but only in countries that are ethnically homogeneous. In highly ethnically polarized countries, net foreign assets significantly decreased. To explain this asymmetry, the paper shows that in ethnically polarized countries commodity windfalls lead to large increases in government consumption expenditures and political corruption. The paper's findings are consistent with theoretical models of the current account that have a built-in voracity effect.
Subjects:commodity windfalls
net foreign assets
polarization
JEL:F32
Q33
Z10
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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