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Trade openness reduces growth volatility when countries are well diversified

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  • Mona Haddad
  • Jamus Jerome Lim
  • Cosimo Pancaro
  • Christian Saborowski

Abstract

This paper addresses the mechanisms by which trade openness affects growth volatility. Using a diverse set of export concentration measures, we present strong evidence pointing to an important role for export diversification in conditioning the effect of trade openness on growth volatility. Indeed, the effect of openness on volatility is shown to be negative for a significant proportion of countries with relatively diversified export baskets.

Suggested Citation

  • 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.
    • Handle: RePEc:cje:issued:v:46:y:2013:i:2:p:765-790
    DOI: 10.1111/caje.12031
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    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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