Terms of trade volatility increases growth volatility in Africa, but institutions help.
The study looked at how changes in trade terms affect economic growth in African countries. They found that when trade terms are unstable, economic growth is also unstable. However, good institutions can help lessen this negative impact. Additionally, having a strong financial system can also help absorb the shocks from trade term volatility, with financial institutions playing a bigger role than financial markets. These findings were consistent across different ways of measuring economic growth and trade term volatility.