Advanced Search
MyIDEAS: Login

Openness, Volatility and the Risk Content of Exports

Contents:

Author Info

  • Julian di Giovanni

    ()
    (Middle East and Central Asia International Monetary Fund)

  • Andrei A. Levchenko

Abstract

It has been observed that more open countries experience higher output growth volatility. This paper uses an industry-level panel dataset of manufacturing production and trade to analyze the mechanisms through which trade can affect the volatility of production. We find that sectors with higher trade are more volatile and that trade leads to increased specialization. These two forces act to increase overall volatility. We also find that sectors which are more open to trade are less correlated with the rest of the economy, an effect that acts to reduce aggregate volatility. The point estimates indicate that each of the three effects has an appreciable impact on aggregate volatility. Added together they imply that a one standard deviation change in trade openness is associated with an increase in aggregate volatility of about 15% of the mean volatility observed in the data. The results are also used to provide estimates of the welfare cost of increased volatility under several sets of assumptions. We then propose a summary measure of the riskiness of a country's pattern of export specialization, and analyze its features across countries and over time. There is a great deal of variation in countries' risk content of exports, but it does not have a simple relationship to the level of income or other country characteristics

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://repec.org/sed2006/up.1756.1137680981.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 86.

as in new window
Length:
Date of creation: 03 Dec 2006
Date of revision:
Handle: RePEc:red:sed006:86

Contact details of provider:
Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Fax: 1-314-444-8731
Email:
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC

Related research

Keywords: Trade; Output Volatility; Risk Content of Exports;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Stephane Pallage & Michel A. Robe, 2003. "On the Welfare Cost of Economic Fluctuations in Developing Countries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 677-698, 05.
  2. Tom Krebs & Pravin Krishna & William Maloney, 2004. "Trade Policy, Income Risk, and Welfare," Working Papers 2004-09, Brown University, Department of Economics.
  3. Reis, Ricardo, 2005. "The Time-Series Properties of Aggregate Consumption: Implications for the Costs of Fluctuations," CEPR Discussion Papers 5054, C.E.P.R. Discussion Papers.
  4. Kevin Cowan & Alejandro Neut, 2007. "Intermediate Goods, Institutions and Output per Worker," Working Papers Central Bank of Chile 420, Central Bank of Chile.
  5. Matías Braun & Claudio Raddatz, 2004. "Trade liberalization and the politics of financial development," Working Papers 04-3, Federal Reserve Bank of Boston.
  6. Miklos Koren & Silvana Tenreyro, 2005. "Volatility and development," LSE Research Online Documents on Economics 3743, London School of Economics and Political Science, LSE Library.
  7. Orazio Attanasio & Steven J. Davis, 1994. "Relative Wage Movements and the Distribution of Consumption," NBER Working Papers 4771, National Bureau of Economic Research, Inc.
  8. Miklos Koren & Silvana Tenreyro, 2005. "Volatility and development," LSE Research Online Documents on Economics 5312, London School of Economics and Political Science, LSE Library.
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 in new window

Cited by:
  1. Liu, Xuan, 2007. "Trade Openness and the Cost of Sudden Stops: The Role of Financial Friction," MPRA Paper 18260, University Library of Munich, Germany, revised 26 Oct 2009.
  2. Alejandro Cuñat & Marc J. Melitz, 2007. "Volatility, Labor Market Flexibility, and the Pattern of Comparative Advantage," CEP Discussion Papers dp0799, Centre for Economic Performance, LSE.
  3. Paolo Epifani & Gino Gancia, 2005. "Openness, government size and the terms of trade," Economics Working Papers 915, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2008.
  4. Olaberria, Eduardo & Rigolini, Jamele, 2009. "Managing East Asia's macroeconomic volatility," Policy Research Working Paper Series 4989, The World Bank.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:red:sed006:86. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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