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The Implications of Trade Barriers for Sectoral Diversification and Macroeconomic Stability in Developing Economies

Listed author(s):
  • Gabriel Srour
Registered author(s):

    The paper examines the implications of lower trade barriers for sectoral diversification and macroeconomic stability in developing economies with a large primary goods sector. It shows that lower trade barriers can have ambiguous effects on macroeconomic stability. It shows also that diversification, in the form of equal distribution of resources between nonprimary sectors, may be counterproductive. In fact, investment in the nonprimary sector with lower trade barriers unambiguously enhances macroeconomic stability in a developing economy that is subject to substantial primary shocks.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=18855
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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/50.

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    Length: 26
    Date of creation: 01 Feb 2006
    Handle: RePEc:imf:imfwpa:06/50
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    1. Maurice Obstfeld and Kenneth Rogoff., 1995. "Exchange Rate Dynamics Redux," Center for International and Development Economics Research (CIDER) Working Papers C95-048, University of California at Berkeley.
    2. David Bowman & Brian M. Doyle, 2003. "New Keynesian, open-economy models and their implications for monetary policy," International Finance Discussion Papers 762, Board of Governors of the Federal Reserve System (U.S.).
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    4. Collier, Paul & Dehn, Jan, 2001. "Aid, shocks, and growth," Policy Research Working Paper Series 2688, The World Bank.
    5. Gabriel Srour, 2004. "Economic Integration, Sectoral Diversification, and Exchange Rate Policy in a Developing Economy," IMF Working Papers 04/60, International Monetary Fund.
    6. Jordi Galí & Tommaso Monacelli, 2005. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 707-734.
    7. Giancarlo Corsetti & Paolo Pesenti, 2002. "Self-validating optimum currency areas," Staff Reports 152, Federal Reserve Bank of New York.
    8. Betts, Caroline & Devereux, Michael B., 1996. "The exchange rate in a model of pricing-to-market," European Economic Review, Elsevier, vol. 40(3-5), pages 1007-1021, April.
    9. Hali J. Edison & Michael W. Klein & Luca Ricci & Torsten Sloek, 2002. "Capital Account Liberalization and Economic Performance: Survey and Synthesis," NBER Working Papers 9100, National Bureau of Economic Research, Inc.
    10. Obstfeld, Maurice, 2001. "International Macroeconomics: Beyond the Mundell-Fleming Model," Center for International and Development Economics Research, Working Paper Series qt6796n8s0, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    11. Paul Cashin & C. John McCDermott, 2002. "The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability," IMF Staff Papers, Palgrave Macmillan, vol. 49(2), pages 2-2.
    12. Paul Cashin & C John McDermott & Alasdair Scott, 1999. "Booms and slumps in world commodity prices," Reserve Bank of New Zealand Discussion Paper Series G99/8, Reserve Bank of New Zealand.
    13. Francis E. Warnock, 1998. "Idiosyncratic tastes in a two-country optimizing model: implications ; of a standard presumption," International Finance Discussion Papers 631, Board of Governors of the Federal Reserve System (U.S.).
    14. Michael B. Devereux & Charles Engel, 1998. "Fixed vs. Floating Exchange Rates: How Price Setting Affects the Optimal Choice of Exchange-Rate Regime," NBER Working Papers 6867, National Bureau of Economic Research, Inc.
    15. Tille, Cedric, 2001. "The role of consumption substitutability in the international transmission of monetary shocks," Journal of International Economics, Elsevier, vol. 53(2), pages 421-444, April.
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