Using a dataset of 104 countries over a period from 1966 to 2004, this paper analyses the relevance of country specific shocks for income volatility in open economies. We show that exposure to country specific shocks has a positive and significant impact on GDP volatility. In particular, we find that the degree to which the cycles of different trading partners are correlated is more important in explaining exporters’ GDP volatility than the volatility of demand in individual export market. We also show that geographical diversification is a significant determinant of countries' exposure to country specific shocks.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
7123.
Find related papers by JEL classification: C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
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