Business Intelligence

Terms Of Trade And Growth Of Resource Economies

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Executive Summary

The current paper demonstrates a dichotomy of the growth response to changes in the barter terms of trade, employing as case studies the two African countries, Botswana and Nigeria. Using distributed-lag analysis, the paper finds that the effect of terms of trade on output is positive and negative for the two countries, respectively. The author interprets these results as supportive of the 'Resource curse' hypothesis for Nigeria, but not for Botswana. The author further argues that the superior institutional quality in Botswana, relative to Nigeria, is likely responsible for the contrasting results.

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