IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-20-01144.html
   My bibliography  Save this article

Does volatility hinder economic complexity?

Author

Listed:
  • Désiré Avom

    (Faculty of economics and management, CEREG, University of Yaoundé II Soa, Cameroon)

  • Brice Kamguia

    (Faculty of economics and management, LAREFA, University of Dschang, Cameroon)

  • Joseph Pasky Ngameni

    (Faculty of economics and management, LAREFA, University of Dschang, Cameroon)

Abstract

This paper investigates the effect of the output and terms of trade volatility on economic complexity. To this end, we apply ordinanry least square, fixed effect and System GMM approach for a panel of 119 countries over the period 1998-2017. The findings reveal that the output and terms of trade volatility negatively affects economic complexity. Our empirical results also indicate that financial development, foreign direct investment, internet and income per capita have a positive effect on economic complexity while natural ressources have a negative effect.

Suggested Citation

  • Désiré Avom & Brice Kamguia & Joseph Pasky Ngameni, 2021. "Does volatility hinder economic complexity?," Economics Bulletin, AccessEcon, vol. 41(3), pages 1187-1202.
    • Handle: RePEc:ebl:ecbull:eb-20-01144
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2021/Volume41/EB-21-V41-I3-P100.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-1151, December.
    2. Aizenman, Joshua & Marion, Nancy, 1999. "Volatility and Investment: Interpreting Evidence from Developing Countries," Economica, London School of Economics and Political Science, vol. 66(262), pages 157-179, May.
    3. Kangni Kpodar & Maëlan Le Goff & Raju Jan Singh, 2019. "Financial Deepening, Terms of Trade Shocks and Growth in Low-Income Countries," Working papers 719, Banque de France.
    4. Mohamed Saadi, 2020. "Remittance Inflows and Export Complexity: New Evidence from Developing and Emerging Countries," Journal of Development Studies, Taylor & Francis Journals, vol. 56(12), pages 2266-2292, December.
    5. Mona Haddad & Jamus Jerome Lim & Cosimo Pancaro & Christian Saborowski, 2013. "Trade openness reduces growth volatility when countries are well diversified," Canadian Journal of Economics, Canadian Economics Association, vol. 46(2), pages 765-790, May.
    6. Lisa Chauvet & Marin Ferry & Patrick Guillaumont & Sylviane Guillaumont Jeanneney & Sampawende J.-A. Tapsoba & Laurent Wagner, 2019. "Volatility widens inequality. Could aid and remittances help?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(1), pages 71-104, February.
    7. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," American Economic Review, American Economic Association, vol. 99(2), pages 466-472, May.
    8. Cesar A. Hidalgo & Ricardo Hausmann, 2009. "The Building Blocks of Economic Complexity," Papers 0909.3890, arXiv.org.
    9. Imbs, Jean, 2007. "Growth and volatility," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1848-1862, October.
    10. Mr. Nikola Spatafora & Rahul Anand & Mr. Saurabh Mishra, 2012. "Structural Transformation and the sophistication of Production," IMF Working Papers 2012/059, International Monetary Fund.
    11. Roland Kangni KPODAR & Maëlan LE GOFF & Raju Jan SINGH, 2018. "Financial Deepening, Terms of Trade Shocks, and Growth Volatility in Low-Income Countries," Working Papers P238, FERDI.
    12. Beata S. Javorcik & Alessia Lo Turco & Daniela Maggioni, 2018. "New and Improved: Does FDI Boost Production Complexity in Host Countries?," Economic Journal, Royal Economic Society, vol. 128(614), pages 2507-2537, September.
    13. Jarreau, Joachim & Poncet, Sandra, 2012. "Export sophistication and economic growth: Evidence from China," Journal of Development Economics, Elsevier, vol. 97(2), pages 281-292.
    14. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
    15. Awokuse, Titus O., 2007. "Causality between exports, imports, and economic growth: Evidence from transition economies," Economics Letters, Elsevier, vol. 94(3), pages 389-395, March.
    16. Martin, Philippe & Ann Rogers, Carol, 2000. "Long-term growth and short-term economic instability," European Economic Review, Elsevier, vol. 44(2), pages 359-381, February.
    17. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    18. Hartmann, Dominik & Guevara, Miguel R. & Jara-Figueroa, Cristian & Aristarán, Manuel & Hidalgo, César A., 2017. "Linking Economic Complexity, Institutions, and Income Inequality," World Development, Elsevier, vol. 93(C), pages 75-93.
    19. Bejan, Maria, 2006. "Trade Openness and Output Volatility," MPRA Paper 2759, University Library of Munich, Germany.
    20. Sel Dibooğlu & Eisa Aleisa, 2004. "Oil Prices, Terms of Trade Shocks, and Macroeconomic Fluctuations in Saudi Arabia," Contemporary Economic Policy, Western Economic Association International, vol. 22(1), pages 50-62, January.
    21. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    22. Kang-Kook Lee & Trung V. Vu, 2020. "Economic complexity, human capital and income inequality: a cross-country analysis," The Japanese Economic Review, Springer, vol. 71(4), pages 695-718, October.
    23. Canh Phuc Nguyen & Christophe Schinckus & Thanh Dinh Su, 2020. "The drivers of economic complexity: International evidence from financial development and patents," International Economics, CEPII research center, issue 164, pages 140-150.
    24. Tommaso Nannicini & Andreas Billmeier, 2011. "Economies in Transition: How Important Is Trade Openness for Growth?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(3), pages 287-314, June.
    25. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "Recovery from Financial Crises: Evidence from 100 Episodes," American Economic Review, American Economic Association, vol. 104(5), pages 50-55, May.
    26. Ricardo Hausmann & César Hidalgo, 2011. "The network structure of economic output," Journal of Economic Growth, Springer, vol. 16(4), pages 309-342, December.
    27. Peter K. Schott, 2004. "Across-Product Versus Within-Product Specialization in International Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(2), pages 647-678.
    28. Chor Foon Tang & Salah Abosedra, 2020. "Does Financial Development Moderate the Effects on Growth Volatility? The Experience of Malaysia," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 14(4), pages 361-381, November.
    29. Montalbano, Pierluigi, 2011. "Trade Openness and Developing Countries' Vulnerability: Concepts, Misconceptions, and Directions for Research," World Development, Elsevier, vol. 39(9), pages 1489-1502, September.
    30. Eicher, Theo S. & Schubert, Stefan F. & Turnovsky, Stephen J., 2008. "Dynamic effects of terms of trade shocks: The impact on debt and growth," Journal of International Money and Finance, Elsevier, vol. 27(6), pages 876-896, October.
    31. Cavallo, Eduardo A. & Frankel, Jeffrey A., 2008. "Does openness to trade make countries more vulnerable to sudden stops, or less? Using gravity to establish causality," Journal of International Money and Finance, Elsevier, vol. 27(8), pages 1430-1452, December.
    32. Syed Jawaid & Abdul Waheed, 2011. "Effects of Terms of Trade and its Volatility on Economic Growth: A Cross Country Empirical Investigation," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 18(2), pages 217-229, December.
    33. Benarroch, Michael & Pandey, Manish, 2008. "Trade openness and government size," Economics Letters, Elsevier, vol. 101(3), pages 157-159, December.
    34. Dan Andrews & Daniel Rees, 2009. "Macroeconomic Volatility and Terms of Trade Shocks," RBA Research Discussion Papers rdp2009-05, Reserve Bank of Australia.
    35. Felipe, Jesus & Kumar, Utsav & Abdon, Arnelyn & Bacate, Marife, 2012. "Product complexity and economic development," Structural Change and Economic Dynamics, Elsevier, vol. 23(1), pages 36-68.
    36. Mr. Ayhan Kose & Mr. Kenneth Rogoff & Mr. Eswar S Prasad & Shang-Jin Wei, 2003. "Effects of Financial Globalization on Developing Countries: Some Empirical Evidence," IMF Occasional Papers 2003/007, International Monetary Fund.
    37. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    38. Yuan Fang & Guoda Gu & Hongyi Li, 2015. "The impact of financial development on the upgrading of China’s export technical sophistication," International Economics and Economic Policy, Springer, vol. 12(2), pages 257-280, June.
    39. Ms. Era Dabla-Norris & Mr. Narapong Srivisal, 2013. "Revisiting the Link Between Finance and Macroeconomic Volatility," IMF Working Papers 2013/029, International Monetary Fund.
    40. Bleaney, Michael & Greenaway, David, 2001. "The impact of terms of trade and real exchange rate volatility on investment and growth in sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 65(2), pages 491-500, August.
    41. Jouini, Nizar & Oulmane, Nassim & Peridy, Nicolas, 2014. "North African countries (NACs) production and export structure: Towards diversification and export sophistication strategy," MPRA Paper 62476, University Library of Munich, Germany.
    42. Balavac, Merima & Pugh, Geoff, 2016. "The link between trade openness, export diversification, institutions and output volatility in transition countries," Economic Systems, Elsevier, vol. 40(2), pages 273-287.
    43. Lapatinas, Athanasios, 2019. "The effect of the Internet on economic sophistication: An empirical analysis," Economics Letters, Elsevier, vol. 174(C), pages 35-38.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Henri Njangang & Youssouf Nvuh-Njoya, 2023. "Unravelling the link between democracy and economic complexity: fresh evidence from the Varieties of Democracy data," SN Business & Economics, Springer, vol. 3(3), pages 1-32, March.
    2. Brice Kamguia & Sosson Tadadjeu & Clovis Miamo & Henri Njangang, 2022. "Does foreign aid impede economic complexity in developing countries?," International Economics, CEPII research center, issue 169, pages 71-88.
    3. Valentine Soumtang Bime & Dieudonné Mignamissi & Agathe Cassandra Koumis Ngagni, 2024. "Does financial openness matter for economic transformation in sub-Saharan Africa?," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-49, April.
    4. Sakiru, Solarin Adebola & Gil-Alana, Luis A. & Gonzalez-Blanch, Maria Jesus, 2022. "Persistence of economic complexity in OECD countries," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 603(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gnangnon, Sèna Kimm, 2022. "Effect of the utilization of non-reciprocal trade preferences offered by the QUAD countries on beneficiary countries' economic complexity," Journal of the Japanese and International Economies, Elsevier, vol. 65(C).
    2. Gnangnon, Sèna Kimm, 2020. "Aid for Trade flows and Poverty Reduction in Recipient-Countries," EconStor Preprints 213807, ZBW - Leibniz Information Centre for Economics.
    3. Kamguia, Brice & Tadadjeu, Sosson & Miamo, Clovis & Njangang, Henri, 2022. "Does foreign aid impede economic complexity in developing countries?," International Economics, Elsevier, vol. 169(C), pages 71-88.
    4. Avom, Désiré & Keneck-Massil, Joseph & Njangang, Henri & Nvuh-Njoya, Youssouf, 2022. "Why are some resource-rich countries more sophisticated than others? The role of the regime type and political ideology," Resources Policy, Elsevier, vol. 79(C).
    5. Avom, Désiré & Kamguia, Brice & Ngameni, Joseph Pasky & Njangang, Henri, 2021. "How does terms of trade volatility affect macroeconomic volatility? The roles of financial development and institutions," International Economics, Elsevier, vol. 168(C), pages 98-114.
    6. Trung V. Vu, 2022. "Does institutional quality foster economic complexity? The fundamental drivers of productive capabilities," Empirical Economics, Springer, vol. 63(3), pages 1571-1604, September.
    7. Gnangnon, Sèna Kimm, 2023. "Effect of the duration of membership in the GATT/WTO on economic growth volatility," Structural Change and Economic Dynamics, Elsevier, vol. 65(C), pages 448-467.
    8. Gnangnon, Sèna Kimm, 2022. "Effect of the Duration of Membership in the GATT/WTO on Human Development in Developed and Developing Countries," EconStor Preprints 265061, ZBW - Leibniz Information Centre for Economics.
    9. Balavac, Merima & Pugh, Geoff, 2016. "The link between trade openness, export diversification, institutions and output volatility in transition countries," Economic Systems, Elsevier, vol. 40(2), pages 273-287.
    10. Valentine Soumtang Bime & Dieudonné Mignamissi & Agathe Cassandra Koumis Ngagni, 2024. "Does financial openness matter for economic transformation in sub-Saharan Africa?," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-49, April.
    11. Sèna Kimm Gnangnon, 2023. "Do unilateral trade preferences help reduce poverty in beneficiary countries?," International Journal of Economic Policy Studies, Springer, vol. 17(1), pages 249-288, February.
    12. Canh Phuc Nguyen & Thanh Dinh Su, 2021. "Financing the economy: The multidimensional influences of financial development on economic complexity," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(4), pages 644-684, May.
    13. Ben Saad, Myriam & Brahim, Mariem & Schaffar, Alexandra & Guesmi, Khaled & Ben Saad, Rym, 2023. "Economic complexity, diversification and economic development: The strategic factors," Research in International Business and Finance, Elsevier, vol. 64(C).
    14. Nguyen, Canh Phuc, 2021. "Gender equality and economic complexity," Economic Systems, Elsevier, vol. 45(4).
    15. Henri Njangang & Youssouf Nvuh-Njoya, 2023. "Unravelling the link between democracy and economic complexity: fresh evidence from the Varieties of Democracy data," SN Business & Economics, Springer, vol. 3(3), pages 1-32, March.
    16. Gnangnon, Sèna Kimm, 2021. "Do Unilateral Trade Preferences Help Reduce Poverty in Beneficiary Countries?," EconStor Preprints 247346, ZBW - Leibniz Information Centre for Economics.
    17. Vu, Trung V., 2020. "Economic complexity and health outcomes: A global perspective," Social Science & Medicine, Elsevier, vol. 265(C).
    18. Poncet, Sandra & Starosta de Waldemar, Felipe, 2013. "Export Upgrading and Growth: The Prerequisite of Domestic Embeddedness," World Development, Elsevier, vol. 51(C), pages 104-118.
    19. Sèna Kimm Gnangnon & Harish Iyer, 2017. "Structural Economic Vulnerability, Trade Policy and FDI Inflows," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 1-35, February.
    20. Gnangnon, Sèna Kimm, 2021. "Effect of the Utilization of Non-Reciprocal Trade Preferences offered by the QUAD on Economic Growth in Beneficiary Countries," EconStor Preprints 242848, ZBW - Leibniz Information Centre for Economics.

    More about this item

    Keywords

    Economic complexity; Output volatility; Terms of trade volatility;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F2 - International Economics - - International Factor Movements and International Business

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-20-01144. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.