Abstract
Commodity prices are characterized by boom and bust cycles. In this article, the impact of the commodity boom of the 2000s on Latin American and Caribbean economies is studied by analyzing four categories of commodity exports (agricultural raw materials, fuel, food, ore and minerals) as well as manufactured exports. Latin American and Caribbean economies had higher growth during the 2000s than in the period before the commodities boom. This study examines whether the higher growth was explained by the commodity boom, and if so, which of the different export commodities accounted for this higher growth. The findings should be relevant to understanding the effects on economic growth of a possible bust in commodity prices. The results show that ore and mineral exports, fuel exports and food exports generally had a negative effect on GDP per capita growth but ore and mineral exports had a positive effect on LAC countries during the boom. During the boom period, agricultural exports had negative effects, especially for LAC countries. Fuel exports had a positive effect on LAC and non-LAC countries during the boom. Manufacturing exports in general had a positive effect on economic growth, but in the boom period this effect almost disappeared for the LAC countries.
Highlights
Growth of real gross domestic product (GDP) is generally considered to be beneficial for a country and a sign of a well-managed economy
The results show that ore and mineral exports, fuel exports and food exports generally had a negative effect on GDP per capita growth but ore and mineral exports had a positive effect on Latin American and Caribbean (LAC) countries during the boom
The analysis of model 2 (Eq 3) shows that capital formation and export growth are consistent with the results in model 1, but trade partner growth loses its statistical significance; instead the interaction between trade partner growth and ‘‘Boom’’ has a significant coefficient of 0.069, indicating that this effect is concentrated during the commodity boom period
Summary
Growth of real gross domestic product (GDP) is generally considered to be beneficial for a country and a sign of a well-managed economy. This study adds to the literature by examining the impact of exports during the commodity boom of the first decade of the twenty first century on the growth of Latin American and Caribbean (LAC) countries. Since the majority of LAC countries are important commodity exporters, the question in this study is whether or not their increased growth is related to the commodities boom of the 2000s. To answer this question we measure how much of GDP per capita growth can be assigned to the boom using a panel data analysis applied to LAC and non-LAC countries.
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