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Commodity Windfalls, Democracy and External Debt


  • Rabah Arezki,

  • Markus Brückner

  • Corresponding author: Markus Brückner, National University of Singapore, Faculty of Arts & Social Sciences, AS2 Level 6, 1 Arts Link, Singapore 117570, Singapore. Email:

  • 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.


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.