Cliometrica

, Volume 9, Issue 3, pp 333–358 | Cite as

Immunity from the resource curse? The long run impact of commodity price volatility: evidence from Canada, 1900–2005

Original Paper
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Abstract

This paper documents the channels through which commodity price volatility can affect resource intensive industries’ investment decisions, production levels and profitability. Over the very long run, the Canadian forestry sector was not immune from the negative effects of commodity price volatility. However, the long run averages mask dynamic and asymmetric patterns in the sector’s responses to price volatility. The supply of investment funds from formal-external sources was suppressed during episodes of high and rising commodity price volatility, but insensitive to low and falling volatility. These effects weakened as the economy matured. The accumulation of reproducible and natural capital was affected by commodity price volatility through an investment supply channel that was also asymmetric, but in this case, the effect was strongest during low and falling volatility. These results show how a maturing economy with diversified investment opportunities can become increasingly immune from the negative effects of commodity price volatility.

Keywords

Commodity price volatility Resource-based growth Early industrialization 

JEL Classification

N52 O13 Q32 
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Notes

Acknowledgments

I would like to thank André Bernier, Herb Emery, Richard Hornbeck, David Jacks, Frank Lewis, Gregor Smith, and Jeffrey Williamson for taking time to comment on earlier versions of this paper. I would also like to thank seminar participants at UC-Davis, Yale, University of Calgary, and University of Alberta, and the editor and referees at Cliometrica. Financial assistance provided by SSHRC grant # 410-2007-0323 and the Corporate Policy and Portfolio Coordination Branch of Natural Resources Canada is gratefully acknowledged. All remaining errors and omissions remain the responsibility of the author.

Supplementary material

11698_2014_118_MOESM1_ESM.pdf (3.2 mb)
Supplementary material 1 (PDF 3,227 kb)

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Copyright information

© Springer-Verlag Berlin Heidelberg 2014

Authors and Affiliations

  1. 1.Department of EconomicsQueen’s UniversityKingstonCanada

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