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A Study On The Impacts Of International Commodity Price Volatility To Developing Countries

Posted on:2015-12-28Degree:DoctorType:Dissertation
Country:ChinaCandidate:S GuoFull Text:PDF
GTID:1109330428974977Subject:Financial engineering
Abstract/Summary:PDF Full Text Request
It is illuminated by the Resource Curse Hypothesis that, countries with great natural resource wealth tend to grow more slowly than resource-poor countries; also known as, countries with high income from commodity export tend to grow more slowly than non-resource-export countries. This hypothesis, which was firstly presented in1990s, has subverted the traditional opinion that regarded rich natural resource as an incentive to the economic growth, and is identical with the new phenomenons. During the recent decades, resource-abundant countries, such as many countries in Africa and Latin America, suffered from the long-lasting growth stagnancy. At the same time, some resource-poor countries, such as Japan, South Korea and Singapore had experienced rapid growth. For this reason, the Resource Curse Hypothesis has become one of the mainstreams in academia. Even some of the most influencial organizations like United Nations, World Bank and IMF approve of it.However, until now, Resource Curse Hypothesis remains to be a hypothesis, because of many different voices and arguments. Some questioned the adopted samples and measures in the original study and showed that their own study could not testify the hypothesis. Some argued that the indicators adopted to represent resource-abundant were inappropriate. With the new indicators, they could not testify the hypothesis. Besides those, some insisted that the so-called Resource Curse Hypothesis was not the problem of resource-abundant, but the problem of excessive volatility of its prices. This dissertation carries forward the last argument, which considers that the rise of commodity price is beneficial for the economy of countries, but the volatility of commodity price will dampen it.Besides inheriting the precedent point of view, this dissertation also expands the research. In the previous literature, all the countries were included. The results showed that only the commodity-export-dependent countries are prone to be negatively influenced by the commodity price volatility. Nevertheless, on one hand, developing countries are not like30years ago anymore, many of them are no longer dependent on commodity export. It is a question whether commodity price volatility will impact developing countries nowadays. On the other hand, the developing countries are much more vulnerable in economic resilience that developed countries. Since they are more possible to be incompetent in defending themselves from external price shocks, it is reasonable to pay more attention to developing countries. Therefore, one of the main adjustments in this dissertation is aiming the developing countries and examining the impact of commodity price movement and volatility to their economic growth. We adopted the system Generalized Methods of Moments (GMM) to erase the country effects in the error. The results have testified our assumptions which are: the rise of commodity price is beneficial for the economy of developing countries, but the volatility of commodity price will dampen it.On this basis, this dissertation analysizes and examines the channels through which the commodity price volatility influences the economic growth of developing countries. Firstly, we use the commodity terms of trade index to represent commodity price index. After that, we conclude the total impact of commodity terms of trade through three main channels:physical capital accumulation, human capital accumulation and total factor productivity. This is basically from the simulation of the influence from exogenous factors to economic growth, using a Cobb-Douglas production function from Solow growth model. The result shows that:the commodity price movement impacts economic growth through physical capital accumulation and total factor productivity; the commodity price volatility impacts economic growth through human capital accumulation.After examining the impacts and channels, this dissertation conducts further extending studies and attempts to discover the roles played by the various features of countries or commodities in the impact to the developing countries. The features include:the size and density of population, the size of economy, income disparity, the dependency on commodity export, whether being OPEC, transitional or emerging market countries, and whether being dependent on one of the three groups of commodity export. The result shows that:the countries denpedent on commodity export have higher possibility to be impacted by commodity price; the transitional countries are less possible to be impacted by commodity price volatility than non-transitional countries; the emerging market countries seem to be able to overcome the negative impact from commodity price volatility. In addition, the countries dependent on food or energy export seem to be more prone to the impact from commodity price volatility than countries denpendent on other commodities.Lastly, after finishing the examination on impacts towards the economic growth, this dissertation has made a proactive attempt to expand the research scope from the quantity of economic development to the quality. This attempt is introduced to prove that the impact from commodity price volatility is not restricted in economic growth. Hence we substitute the economic growth indicator with Human Development Index (HDI) and re-examine. The result shows that the commodity price volatility also has a significant impact on the HDI growth of developing countries. This research is not perfect and requires further modification in future studies.
Keywords/Search Tags:Resource Curse, commodity price volatility, economic development, economic growth
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