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The Effects of Volatility, Fiscal Policy Cyclicality and Financial Development on Growth : Evidence for the Eastern Caribbean. / Brueckner, Markus.
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Brueckner, Markus
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Economic conditions and volatility.
- Economic theory & research.
- Emerging markets.
- Financial development.
- Fiscal policy.
- Growth.
- Inequality.
- Macroeconomics and economic growth.
- Poverty reduction.
- Private sector development.
- Pro-poor growth.
- Procyclicality.
- Terms of trade.
- Volatility.
- Local Subjects:
- Economic conditions and volatility.
- Economic theory & research.
- Emerging markets.
- Financial development.
- Fiscal policy.
- Growth.
- Inequality.
- Macroeconomics and economic growth.
- Poverty reduction.
- Private sector development.
- Pro-poor growth.
- Procyclicality.
- Terms of trade.
- Volatility.
- Physical Description:
- 1 online resource (30 pages)
- Other Title:
- Effects of Volatility, Fiscal Policy Cyclicality and Financial Development on Growth
- Place of Publication:
- Washington, D.C. : The World Bank, 2015.
- System Details:
- data file
- Summary:
- This paper presents estimates of the effects that terms of trade volatility has on growth of real gross domestic product per capita. Based on five-year non-overlapping panel data comprising 175 countries during 1980-2010, the paper finds that: (i) in model specifications that do not include country fixed effects, terms of trade volatility has a significant negative average effect on economic growth; (ii) once country fixed effects are included in the model, the average effect of terms of trade volatility on economic growth is not significantly different from zero; (iii) robust to the inclusion of country fixed effects, terms of trade volatility has significantly adverse effects on economic growth in countries with pro-cyclical fiscal policy; and (iv) in model specifications that do not include country fixed effects, financial development is a significant mediating factor with regard to the effect that terms of trade volatility has on economic growth, however, the significance of this effect vanishes once country fixed effects are included in the model. The paper also explores these relationships for the Organization of Eastern Caribbean States region. A key conclusion from the research is that countercyclical fiscal policy and deeper financial markets will have particularly high payoffs in reducing the adverse growth effects of terms of trade volatility in the Organization of Eastern Caribbean States region.
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