Gold Rents, Fiscal Procyclicality, and the Growth Cost in Sub-Saharan Africa

Abstract The surge and volatility of the gold price confront Sub-Saharan Africa's mining economies, and the Sahel in particular, with a classic resource-management dilemma. Using a panel of 48 countries over 2000–2024, this paper establishes three results. First, foreign direct investment tracks the world cycle almost one-for-one rather than buffering it, although this exposure reflects the global commodity cycle rather than a strictly gold-specific effect. Second, public spending in three Sahelian economies is significantly more procyclical than in the rest of the region; the excess is economically large and significant under standard errors robust to cross-sectional dependence (around +2, p=0.04), but it remains fragile under the wild cluster bootstrap with only three treated countries, is concentrated over 2000–2019, and does not generalize to the other Sahelian producers. It is explained neither by the absence of a written fiscal rule nor by general institutional quality. Third, the interaction between the gold-price shock and conflict intensity is negative and significant at the one- and two-year horizons, the windfall ceasing to translate into growth under insecurity. A counterfactual exercise puts the cost of procyclical management at about nine months of growth over three years for a 20 percent price reversal. A Bayesian-estimated open-economy dynamic stochastic general-equilibrium model places the procyclicality parameter in the procyclical region and shows that reducing it cuts output volatility by nearly two thirds. JEL codes : E62, O13, Q33, H61, D74, C33.