IMF Working Papers

Resource Windfalls and Emerging Market Sovereign Bond Spreads: The Role of Political Institutions

By Rabah Arezki, Markus Bruckner

July 1, 2010

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Rabah Arezki, and Markus Bruckner. Resource Windfalls and Emerging Market Sovereign Bond Spreads: The Role of Political Institutions, (USA: International Monetary Fund, 2010) accessed November 24, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We examine the effect that revenue windfalls from international commodity price shocks have on sovereign bond spreads using panel data for 30 emerging market economies during the period 1997-2007. Our main finding is that positive commodity price shocks lead to a significant reduction in the sovereign bond spread in democracies, but to a significant increase in the spread in autocracies. To explain our finding we show that, consistent with the political economy literature on the resource curse, revenue windfalls from international commodity price shocks significantly increased real per capita GDP growth in democracies, while in autocracies GDP per capita growth decreased.

Subject: Commodity price shocks, Commodity prices, Emerging and frontier financial markets, Financial institutions, Financial markets, Financial services, Prices, Sovereign bonds, Yield curve

Keywords: Commodity, Commodity export shock, Commodity price booms, Commodity price data, Commodity price shock, Commodity Price Shocks, Commodity prices, Emerging and frontier financial markets, Export price shock, Global, Political Institutions, Price, Sovereign Bond Spread, Sovereign bonds, UNCTAD commodity statistics, WP, Yield curve

Publication Details

  • Pages:

    11

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2010/179

  • Stock No:

    WPIEA2010179

  • ISBN:

    9781455202133

  • ISSN:

    1018-5941

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