ABSTRACT
Existing literature has shown that volatility may have a negative impact at the macroeconomic level on growth and poverty, an impact which is most damaging for poor countries (Aizenman and Marion, 1993; Ramey and Ramey, 1995; Rodrick, 1999). Aizenman and Pinto (2005) argue that higher volatility can lead to an economic crisis. Bernanke (1983) shows that uncertainty about the return on investment at the firm level may create cyclical fluctuations in aggregate investment. Elder and Serletis (2010) find that volatility in oil prices has had a statistically significant negative effect on aggregate output. Cavalcanti, Mohaddes and Raissi (2012) show that the negative effects of commodity terms of trade volatility offset the positive impact of commodity booms and argue that volatility rather than abundance drives the “resource curse” paradox.4 Huchet-Bourdon (2011) argues that the recent spike in agricultural commodities is rather transitory.
