In a nutshell
- Commodity price volatility harms economic growth of natural resource dependent countries, which tends to result in disappointing long-term economic performance for these countries.
- These negative effects operate through lower accumulation of physical capital and lower TFP.
- Having a Sovereign Wealth Fund can mitigate such negative growth effects, especially in countries that enjoy higher-quality institutions (and hence less pro-cyclical fiscal policies).
- Our results have strong policy implications, including better management of volatility in resource income by setting up forward-looking institutions, and improvements in macroeconomic policy frameworks.
![Can Sovereign Wealth Funds Mitigate the Negative Impact of Volatility?](https://erf.org.eg/app/uploads/2015/12/1598522258_898_76978_nl_km2020-150x150.png)
Research Fellows
Kamiar Mohaddes
Macroeconomist, Judge Business School, University of Cambridge
![Can Sovereign Wealth Funds Mitigate the Negative Impact of Volatility?](https://erf.org.eg/app/uploads/2015/12/1601925303_751_45633_nl_mehdiraissi-150x150.png)
Authors
Mehdi Raissi
Senior Economist, International Monetary Fund