Natural Resources, International Commodity Prices and Economic Performance in Sub-Saharan Africa (1990–2019)

In this paper, we investigate the link between windfall gains and losses of income associated with commodity exports and economic performance in a panel of 45 sub-Saharan African (SSA) countries over the period from 1990 to 2019. Windfall gains and losses of income are measured in terms of fluctuations in a country-specific commodity terms of trade (CTOT) index in which each commodity is weighted by the ratio of exports of that commodity in the country’s gross domestic product (GDP). The CTOT index therefore reflects the commodity export specialisation for individual countries. The data on CTOT are taken from the International Monetary Fund. Additionally, we use changes in real GDP per capita as our SSA economic performance measure. We employ a random coefficient model that yields individual estimates for each of the countries included in the analysis. Our approach is based on the assumption that the effect of windfall gains and losses on real GDP per capita growth varies across different SSA countries. Our main conclusion can be elaborated as follows: first, natural resources have undoubtedly contributed to higher economic growth in SSA countries since 1990. Second, when SSA countries are analytically divided into two groups depending on their commodity export specialisation, we find that resource-rich countries—in particular oil rich—are the best economic growth performers during the observation period. Finally, we find that windfall gains from commodity exports are not significantly associated with increased real GDP per capita growth in most agriculture-exporting countries.