Commodity Price Volatility and the Sources of Growth

This paper studies the impact of the level and volatility of commodity terms of trade on economic growth. The authors find that while commodity terms of trade growth enhances real output per capita, volatility exerts a negative impact on economic growth, operating mainly through lower accumulation of physical capital. Moreover, such negative growth effects offset the positive impact of commodity booms; and export diversification of primary commodity- abundant countries contributes to faster growth.