RDP 2009-05: Macroeconomic Volatility and Terms of Trade Shocks Appendix C: Additional Results

Dan Andrews and Daniel Rees

October 2009

Table C1: Correlations – Five-year Block Data
SD terms of trade shocks SD real GDP shocks SD consumption shocks SD investment shocks SD government consumption shocks SD exports shocks SD imports shocks SD inflation shocks Credit (share of GDP) Floating exchange rate Strict monetary policy
SD real GDP shocks 0.39                    
SD consumption shocks 0.44 0.63                  
SD investment shocks 0.36 0.62 0.57                
SD government consumption shocks 0.53 0.47 0.56 0.52              
SD exports shocks 0.47 0.46 0.44 0.40 0.52            
SD imports shocks 0.53 0.59 0.64 0.62 0.52 0.51          
SD inflation shocks 0.50 0.49 0.45 0.48 0.50 0.42 0.50        
Credit (share of GDP) −0.43 −0.27 −0.39 −0.37 −0.49 −0.36 −0.38 −0.48      
Floating exchange rate 0.01 −0.02 −0.11 −0.07 −0.08 −0.05 −0.06 −0.05 0.17    
Strict monetary policy −0.29 −0.30 −0.42 −0.35 −0.34 −0.28 −0.37 −0.36 0.60 0.29  
Openness (share of GDP) −0.33 −0.01 0.07 0.04 −0.03 −0.07 −0.15 −0.28 0.25 −0.13 −0.04

Notes: Correlations based on a sample of 71 countries and 411 observations. All variables specified in logarithmic form except for the floating exchange rate and strict monetary policy dummies.

Sources: see Appendix A
Table C2: Panel Regression Results – Output Volatility Excluding G7
Fixed-effects estimation, five-year blocks, the first ending in 1975, the last in 2005
Terms of trade variables
σ Terms of trade t 0.44** 0.17*** 0.15** 0.44**
σ Terms of trade t * Credit t−1 −0.09     −0.08
σ Terms of trade t * Floating exchange rate t−1   −0.15*   −0.13*
σ Terms of trade t * Strict monetary policy t−1     −0.15 −0.07
Wald tests (p-values)
H0: terms of trade coefficients (jointly) = 0 0.02 0.01 0.05 0.02
H0: institutional coefficients (jointly) = 0 0.27 0.01 0.07 0.01
H0: institution interaction coefficients (jointly) = 0       0.05
Number of countries/observations 64/348 64/348 64/348 64/348
R2 within 0.22 0.22 0.21 0.23
Notes: ***, **, and * indicate that coefficients are significant at the 1, 5 and 10 per cent levels, respectively, using robust standard errors. Control variables not shown for sake of brevity. All regressions include country- and time-fixed effects.
Table C3: Panel Regression Results – Output Volatility Excluding Non-commodity Exporters
Fixed-effects estimation, five-year blocks, the first ending in 1975, the last in 2005
Terms of trade variables
σ Terms of trade t 0.46* 0.18** 0.14* 0.45*
σ Terms of trade t * Credit t−1 −0.10     −0.08
σ Terms of trade t * Floating exchange rate t−1   −0.16*   −0.14*
σ Terms of trade t * Strict monetary policy t−1     −0.15 −0.07
Wald tests (p-values)
H0: terms of trade coefficients (jointly) = 0 0.06 0.04 0.15 0.07
H0: institutional coefficients (jointly) = 0 0.46 0.07 0.20 0.05
H0: institution interaction coefficients (jointly) = 0       0.19
Number of countries/observations 48/260 48/260 48/260 48/260
R2 within 0.19 0.19 0.19 0.20
Notes: ***, **, and * indicate that coefficients are significant at the 1, 5 and 10 per cent levels, respectively, using robust standard errors. Control variables not shown for sake of brevity. All regressions include country- and time-fixed effects.
Table C4: Panel Regression Results – Output Volatility Estimation Beginning in 1981
Fixed-effects estimation, five-year blocks, the first ending in 1985, the last in 2005
Terms of trade variables
σ Terms of trade t 0.12* 0.38* 0.18** 0.16** 0.31
σ Terms of trade t * Credit t−1   −0.07     −0.03
σ Terms of trade t * Floating exchange rate t−1     −0.21**   −0.19*
σ Terms of trade t * Strict monetary policy t−1       −0.25*** −0.18
Control variables
Openness t−1 0.05 0.07 −0.01 0.08 0.03
Credit t−1 0.21* 0.35** 0.27** 0.21* 0.33*
Floating exchange rate t−1 0.21** 0.23*** 0.58*** 0.22** 0.55***
Strict monetary policy t−1 −0.26** −0.31** −0.28** −0.08 −0.18
Wald tests (p-values)
H0: terms of trade coefficients (jointly) = 0   0.09 0.05 0.02 0.03
H0: institutional coefficients (jointly) = 0   0.13 0.00 0.00 0.00
H0: institution interaction coefficients (jointly) = 0         0.02
Number of countries/observations 71/273 71/273 71/273 71/273 71/273
R2 within 0.20 0.20 0.21 0.21 0.22
Notes: ***, **, and * indicate that coefficients are significant at the 1, 5 and 10 per cent levels, respectively, using robust standard errors. All regressions include country- and time-fixed effects.
Table C5: Panel Regression Results – Output Volatility Controlling for Trading Partner Volatility
Fixed-effects estimation, five-year blocks, the first ending in 1985, the last in 2005
Terms of trade variables
σ Terms of trade t 0.10 0.33 0.17* 0.14* 0.23
σ Terms of trade t * Credit t−1   −0.06     −0.01
σ Terms of trade t * Floating exchange rate t−1     −0.24**   −0.22**
σ Terms of trade t * Strict monetary policy t−1       −0.23** −0.17
Control variables
Openness t−1 −0.02 0.01 −0.06 0.02 −0.02
Credit t−1 0.20 0.32 0.28** 0.21 0.30
Floating exchange rate t−1 0.24** 0.26*** 0.64*** 0.25*** 0.61***
Strict monetary policy t−1 −0.30** −0.34** −0.34** −0.14 −0.22
Trading partner output volatility t−1 −0.16 −0.17* −0.15 −0.15 −0.15
Wald tests (p-values)
H0: terms of trade coefficients (jointly) = 0   0.27 0.07 0.08 0.10
H0: institutional coefficients (jointly) = 0   0.27 0.00 0.00 0.00
H0: institution interaction coefficients (jointly) = 0         0.05
Number of countries/observations 64/246 64/246 64/246 64/246 64/246
R2 within 0.20 0.20 0.22 0.20 0.22
Notes: ***, **, and * indicate that coefficients are significant at the 1, 5 and 10 per cent levels, respectively, using robust standard errors. All regressions include country- and time-fixed effects.