Do Sovereign Wealth Funds Dampen the Negative Effects of Commodity Price Volatility?

This paper studies the impact of commodity terms of trade (CToT) volatility on economic
growth (and its sources) in a sample of 69 commodity-dependent countries, and
assesses the role of Sovereign Wealth Funds (SWFs) and quality of institutions in their
long-term growth performance. Using annual data over the period 1981-2014, we
employ the Cross-Sectionally augmented Autoregressive Distributive Lag (CS-ARDL)
methodology for estimation to account for cross-country heterogeneity, cross-sectional
dependence, and feedback effects. We find that while CToT volatility exerts a negative
impact on economic growth (operating through lower accumulation of physical capital
and lower TFP), the average impact is dampened if a country has