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Trade openness reduces growth volatility when countries are well diversified

Author Info

  • 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.

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Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 46 (2013)
Issue (Month): 2 (May)
Pages: 765-790

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Handle: RePEc:cje:issued:v:46:y:2013:i:2:p:765-790
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Find related papers by 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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  1. Raddatz, Claudio, 2005. "Are external shocks responsible for the instability of output in low income countries?," Policy Research Working Paper Series 3680, The World Bank.
  2. Bejan, Maria, 2006. "Trade Openness and Output Volatility," MPRA Paper 2759, University Library of Munich, Germany.
  3. Julian di Giovanni & Andrei A. Levchenko, 2009. "Trade Openness and Volatility," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 558-585, August.
  4. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
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Cited by:

  1. Markus Leibrecht & Johann Scharler, 2012. "Government Size and Business Cycle Volatility; How Important Are Credit Constraints?," Working Paper Series in Economics 237, University of Lüneburg, Institute of Economics.
  2. Pedro Miguel Soares Brinca, 2013. "Distortions in the Neoclassical Growth Model: A Cross Country Analysis," 2013 Papers pbr150, Job Market Papers.
  3. Pierluigi Montalbano, 2010. "Does trade opennes increase vulnerability? A survey of the literature," Working Paper Series 0410, Department of Economics, University of Sussex.
  4. Julie Regolo, 2013. "Export Diversification: How Much Does the Choice of the Trading Partner Matter?," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 13072, Institut d'Economie et Econométrie, Université de Genève.
  5. Parinduri, Rasyad, 2012. "Growth volatility and trade: evidence from the 1967-1975 closure of the Suez Canal," MPRA Paper 39040, University Library of Munich, Germany.
  6. World Bank, 2011. "Trade Expansion through Market Connection : The Central Asian Markets of Kazakhstan, Kyrgyz Republic, and Tajikistan," World Bank Publications, The World Bank, number 2333, October.
  7. Xavier Cirera & Anabel Marin & Ricardo Markwald, 2011. "Explaining the Diversification Path of Exporters in Brazil: How Similar and Sophisticated are New Products?," Working Paper Series 2611, Department of Economics, University of Sussex.
  8. Von Uexkull, Erik, 2012. "Regional trade and employment in ECOWAS," ILO Working Papers 468791, International Labour Organization.
  9. Sergey Kadochnikov & Anna Fedyunina, 2013. "Export diversification in the product space and regional growth: Evidence from Russia," Papers in Evolutionary Economic Geography (PEEG) 1327, Utrecht University, Section of Economic Geography, revised Dec 2013.
  10. Mojsoska Blazevski, Nikica & Kostadinov, Aleksandar & Gregg, Con & Uexkull, Erik von, 2012. "Skills Policies for Economic Diversification in the Former Yugoslav Republic of Macedonia- Enhancing local skills policies for the food and tourism sectors," MPRA Paper 42654, University Library of Munich, Germany.
  11. Regolo, Julie, 2013. "Export diversification: How much does the choice of the trading partner matter?," Journal of International Economics, Elsevier, vol. 91(2), pages 329-342.
  12. Hoekman, Bernard & Wilson, John S., 2010. "Aid for trade : building on progress today for tomorrow's future," Policy Research Working Paper Series 5361, The World Bank.
  13. repec:gen:geneem:13032 is not listed on IDEAS
  14. Emiliano Magrini & Pierluigi Montalbano, 2012. "Trade openness and vulnerability to poverty: Vietnam in the long-run (1992-2008)," Working Paper Series 3512, Department of Economics, University of Sussex.
  15. Costa Junior, Celso Jose, 2012. "Institutional Barrier and the World Income Distribution," MPRA Paper 45633, University Library of Munich, Germany.

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