On the transmission channels for the resource curse

Vol: 
67/2019
Author name: 
Arin KP
Braunfels E
Zenker C
Year: 
2019
Month: 
September
Abstract: 

Recent literature shows that oil revenues may have a positive effect on long-run economic growth. However, there is no clear evidence for such an effect in the medium-run, suggesting the existence of a so-called resource-curse in the medium-run. Taking this as a starting point, we investigate all the transmission channels through which oil revenues can retard growth in the medium-run within a Bayesian Model Averaging (BMA) framework. Our results show that oil revenues have indeed a negative effect on the medium-run economic growth, which is transmitted through medium-term trends in oil prices and (poor) institutional quality.

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