means to test the degree to which private agents internalize growth forecasts.

Table 8 presents estimates for the effect of WEO forecasts and actual growth performance on credit scores. We find that lagged increases in growth forecasts improve subsequent credit scores, while lagged increases in actual growth performance also improve credit scores but with a smaller magnitude. When we control for both forecasts (future) and actual growth performance (past), we find both to be significant, but forecasts carry a larger magnitude. When we include a lagged dummy for resource discoveries we find no change in the direction or significance of the result; indicating that our effect is driven by forecasts and growth performance in general, rather than via discoveries specifically.

Our estimates suggest that investor perceptions of sovereign risk are positively influenced by WEO growth forecasts, even when controlling for the actual growth performance of the country. In other words, when forecasts improve we would expect to see a subsequent improvement in a country’s sovereign investor perception as measured by the Institutional Investor Rating dataset. This holds even when we control for actual growth performance historically. This implies forecasts may factor into investor decisions and other factors such as the cost of borrowing for the country.

||(1)<br>CScore|(2)<br>CScore|(3)<br>CScore|(4)<br>CScore|(5)<br>CScore|(6)<br>CScore|(7)<br>CScore|(8)<br>CScore|(9)<br>CScore|
|---|---|---|---|---|---|---|---|---|---|
|lag<br>~~f~~orecast|2.377<sup>_∗∗∗_</sup>||||1.346<sup>_∗∗∗_</sup>||2.257<sup>_∗∗∗_</sup>||1.252<sup>_∗∗∗_</sup>|
||(0.484)||||(0.337)||(0.494)||(0.338)|
|L.lag<br>~~f~~orecast||2.154<sup>_∗∗∗_</sup>||||1.009<sup>_∗∗_</sup>||||
|||(0.466)||||(0.324)||||
|lag<br>~~a~~ctual|||0.931<sup>_∗∗∗_</sup>||0.722<sup>_∗∗∗_</sup>|||0.795<sup>_∗∗∗_</sup>|0.611<sup>_∗∗∗_</sup>|
||||(0.124)||(0.120)|||(0.101)|(0.110)|
|L.lag<br>~~a~~ctual||||0.997<sup>_∗∗∗_</sup>||0.861<sup>_∗∗∗_</sup>||||
|||||(0.123)||(0.130)||||
|Lag disc dum||||||||||
|(disc in past 2 years (excl. t=0))|||||||-2.457|-3.674|-1.894|
||||||||(2.513)|(2.085)|(2.491)|
|Lag disco*Lag forecast|||||||0.787||-0.262|
||||||||(0.612)||(0.660)|
|Lag discovery*Lag actual||||||||0.953|1.113|
|||||||||(0.506)|(0.674)|
|Controls|CFE YFE|CFE YFE|CFE YFE|CFE YFE|CFE YFE|CFE YFE|CFE YFE|CFE YFE|CFE YFE|
|Standard errors|Robust|Robust|Robust|Robust|Robust|Robust|Robust|Robust|Robust|
|Obs- country year|1095|1034|1601|1540|1080|1019|1095|1419|1072|
|R-sq|0.54|0.52|0.50|0.54|0.61|0.62|0.54|0.55|0.61|
|F Test|23.71|19.70|31.88|19.67|37.74|24.45|21.14|34.74|40.42|

Standard errors in parentheses _∗ p <_ 0 _._ 05, _∗∗ p <_ 0 _._ 01, _∗∗∗ p <_ 0 _._ 001 Table 8: Effects of growth measures on CR If our identification and interpretation holds, it suggests IMF forecasts may be giving an unduly optimistic assessment of the true growth potential of a major oil and gas discovery in countries with weak institutions. In other words, in the presence of a presource curse, growth forecasts may need to be carefully calibrated to take into account the political institutions and governance environment, or else risk distorting expectations and potentially behavior.

Systemically over-forecasting growth following a resource discovery compared to what a country might reasonably achieve given its institutional context is not just evidence for a presource curse. It can have knock-on effects which may drive or exacerbate any growth disappointments. For example, a mis-perception of the feasible growth path following a resource discovery may also be held by policy-makers, citizens and 22