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Export Instability and the External Balance in Developing Countries

Author

Listed:
  • Atish R. Ghosh

    (International Monetary Fund)

  • Jonathan D. Ostry

    (International Monetary Fund)

Abstract

Uncertainty about the export earnings accruing to a country (sometimes referred to as export instability) is an important source of macroeconomic uncertainty in many developing countries. Theory predicts that countries should react to increases in this form of uncertainty by increasing their level of savings. The resulting asset accumulations would then act as the country's insurance against the greater riskiness in its income stream. This paper tests this implication for a large sample of developing countries. In general, the results suggest that developing countries have indeed responded to increases in export instability by building up precautionary savings balances.

Suggested Citation

  • Atish R. Ghosh & Jonathan D. Ostry, 1994. "Export Instability and the External Balance in Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 41(2), pages 214-235, June.
    • Handle: RePEc:pal:imfstp:v:41:y:1994:i:2:p:214-235
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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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