Commodity prices and economic growth in commodity-dependent countries: New evidence from nonlinear and asymmetric analysis

Abstract

The aim of this paper is to present our examination of the short and long-term asymmetric effects of commodity prices on output per capita within the framework of commodity-dependent countries. First, we adopted a panel Autoregressive Distributive Lag (panel-ARDL) model to disentangle the short and long-term symmetric effects. Our results show that commodity booms have long-term resource blessing effects. In the same way, short-term impacts tend to be positive due to improvements in terms of trade. Moreover, our empirical results provide evidence that the effects of the recent commodities boom (2004–2014) differ from those of previous such phenomena, indicating a learning effect from past experiences. Second, using an innovative panel nonlinear ARDL model, we also examined the short and long-term asymmetric effects of commodity prices on growth by decomposing the commodity price index into positive and negative changes. Our findings provide evidence for the existence of asymmetric effects of commodity price shocks. In the long run, positive changes have greater impacts than negative ones on GDP per capita. Further, our results show that, in the short run, growth is only affected by negative shocks, as the impacts of positive ones are insignificant. Based on our findings, we present implications for policy makers.