Macroeconomic Shocks and Conflict: Evidence from Commodity Terms-of-Trade Shocks

Macroeconomic Shocks and Conflict: Evidence from Commodity Terms-of-Trade Shocks | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Macroeconomic Shocks and Conflict: Evidence from Commodity Terms-of-Trade Shocks Tomohide Mineyama, Patcharaporn Leepipatpiboon, Chiara Castrovillari This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-4356164/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This paper analyzes the causal effects of aggregate income changes on the incidence of violent conflicts. We adopt a novel approach by leveraging a country’s commodity terms of trade as a source of exogenous income variation. We find that income changes stemming from commodity terms-of-trade affect conflicts significantly and persistently. The impact of a 1% GDP loss is an increase equivalent to 1.6% of the average conflict incidences. The magnitude is twice as large for low-income countries. Our results also show that the shocks create more violence in countries with higher inequality and less fiscal space, suggesting the transmission channels in play. While prior studies have reported mixed results on the impact of economic shocks on conflicts, we discuss how our novel approach resolves the discrepancies in their findings. Furthermore, we show that there is a second-round effect through spillovers to neighboring countries. Put together with the literature that emphasizes the economic cost of conflicts, our empirical results imply the presence of a vicious feedback loop between weak economic performance and conflicts in a country’s development. JEL classification: D74, E32, O11. Violent conflicts terms-of-trade shock commodity prices low-income countries spillover Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-4356164","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":305225918,"identity":"d9224bac-5bc3-4d21-afdd-eb2ce2c8f573","order_by":0,"name":"Tomohide Mineyama","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAAyklEQVRIiWNgGAWjYFACxgYIzd7YwFBBjAYeuBaegw0MZ4jTAgMSCQzEabEXO9z24GObXTT/zMetGw4w2OTLOxCyRTqx3XBmW3LujNuJbTcOMKRZbjxAWEubNG8bc24DUMvtDwyHDQwbiNHyt60+d/7NgyBbiNXC2HY4d8MNRogWeQI6GHiA7pHsOXc8d+MZkF8M0gwMCGlhn53+TOJHWXXuvOPHn904UGFjIE/IYWDAyAZjAa0wOECMFoY/SGzibBkFo2AUjIKRBAAB4Uf9jehBWwAAAABJRU5ErkJggg==","orcid":"","institution":"International Monetary Fund","correspondingAuthor":true,"prefix":"","firstName":"Tomohide","middleName":"","lastName":"Mineyama","suffix":""},{"id":305225919,"identity":"e772449f-edcf-4d0b-9e96-0d4365dfe66e","order_by":1,"name":"Patcharaporn Leepipatpiboon","email":"","orcid":"","institution":"University of California, Los Angeles","correspondingAuthor":false,"prefix":"","firstName":"Patcharaporn","middleName":"","lastName":"Leepipatpiboon","suffix":""},{"id":305225920,"identity":"3987c21e-f700-406c-a6a9-8ddcff1df2fa","order_by":2,"name":"Chiara Castrovillari","email":"","orcid":"","institution":"Cornell University","correspondingAuthor":false,"prefix":"","firstName":"Chiara","middleName":"","lastName":"Castrovillari","suffix":""}],"badges":[],"createdAt":"2024-05-01 23:23:44","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-4356164/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-4356164/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":59334776,"identity":"36627787-070f-4a53-b11f-2aab0e070e55","added_by":"auto","created_at":"2024-06-29 21:16:37","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":2642263,"visible":true,"origin":"","legend":"","description":"","filename":"Conflict20240501.pdf","url":"https://assets-eu.researchsquare.com/files/rs-4356164/v1_covered_6a7f96b6-d88f-41da-89ba-e5a964e4805d.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Macroeconomic Shocks and Conflict: Evidence from Commodity Terms-of-Trade Shocks","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Violent conflicts, terms-of-trade shock, commodity prices, low-income countries, spillover","lastPublishedDoi":"10.21203/rs.3.rs-4356164/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-4356164/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eThis paper analyzes the causal effects of aggregate income changes on the incidence of violent conflicts. 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