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Exposure to External Country Specific Shocks and Income Volatility


  • Jansen, Marion
  • Lennon, Carolina
  • Piermartini, Roberta


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.

Suggested Citation

  • Jansen, Marion & Lennon, Carolina & Piermartini, Roberta, 2009. "Exposure to External Country Specific Shocks and Income Volatility," CEPR Discussion Papers 7123, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:7123

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    References listed on IDEAS

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    Cited by:

    1. Felipe Starosta de Waldemar, 2010. "How costly is rent-seeking to diversification : an empirical approach," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00461486, HAL.
    2. Edward, Batte Sennoga & John Mary, Matovu, 2016. "Growth and Welfare Effects of Macroeconomic Shocks in Uganda," Occasional Papers 244096, Economic Policy Research Centre (EPRC).
    3. Domańska Agnieszka & Serwa Dobromił, 2013. "Vulnerability to foreign macroeconomic shocks – an empirical study in cross-industry perspective. Example of 2008–2009 global crisis in Europe," Folia Oeconomica Stetinensia, De Gruyter Open, vol. 13(1), pages 150-173, December.
    4. Martin, Julien & Mayneris, Florian, 2015. "High-end variety exporters defying gravity: Micro facts and aggregate implications," Journal of International Economics, Elsevier, vol. 96(1), pages 55-71.
    5. Brito, Márcio Holland de, 2010. "Inserção comercial do Brasil na américa do sul: um estudo sobre os efeitos da China na região," Textos para discussão 248, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    6. International Monetary Fund, 2016. "Uruguay; Selected Issues," IMF Staff Country Reports 16/63, International Monetary Fund.
    7. Martin, Julien & Mayneris, Florian, 2015. "High-end variety exporters defying gravity: Micro facts and aggregate implications," Journal of International Economics, Elsevier, vol. 96(1), pages 55-71.
    8. Peter McQuade, 2010. "The Evolution of International Trade on the Extensive and Intensive Margins," The Institute for International Integration Studies Discussion Paper Series iiisdp325, IIIS, revised Apr 2010.

    More about this item


    export diversification; external shocks; income volatility;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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