Corresponding author: Markus Brückner, National University of Singapore, Faculty of Arts & Social Sciences, AS2 Level 6, 1 Arts Link, Singapore 117570, Singapore. Email: email@example.com.
Commodity Windfalls, Democracy and External Debt*
Article first published online: 9 MAR 2012
© 2012 The Author(s). The Economic Journal © 2012 Royal Economic Society
The Economic Journal
Volume 122, Issue 561, pages 848–866, June 2012
How to Cite
Arezki, R. and Brückner, M. (2012), Commodity Windfalls, Democracy and External Debt. The Economic Journal, 122: 848–866. doi: 10.1111/j.1468-0297.2012.02508.x
We thank Ning Fu for excellent research assistance, three anonymous referees, the editor Wouter Den Haan and Bertrand Candelon, Jiandong Ju, Gian Maria Milesi-Ferretti as well as participants at the INFINITI and Tsinghua-Columbia conference on international finance for helpful comments and suggestions. We also thank Ali Alichi for sharing his dataset on external debt default. Brückner gratefully acknowledges the financial support of the Spanish Ministry of Science and Technology provided by CICYTECO2008-04997. The views in this article are those of the authors alone and do not necessarily represent those of the IMF or IMF policy.
- Issue published online: 1 JUN 2012
- Article first published online: 9 MAR 2012
- Accepted manuscript online: 16 JAN 2012 09:56AM EST
- Submitted: 12 November 2010 , Accepted: 10 September 2011
We examine the effects that windfalls from international commodity price booms have on external debt in a panel of 93 countries during the period 1970–2007. Our main finding is that increases in the international prices of exported commodity goods lead to a significant reduction in the level of external debt in democracies but to no significant reduction in the level of external debt in autocracies. To explain this finding, we show that in autocracies commodity windfalls lead to a statistically significant and quantitatively large increase in government consumption expenditures. In democracies government consumption expenditures did not increase significantly.