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

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  • Gabriel Srour

Abstract

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.

Suggested Citation

  • Gabriel Srour, 2006. "The Implications of Trade Barriers for Sectoral Diversification and Macroeconomic Stability in Developing Economies," IMF Working Papers 2006/050, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2006/050
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    References listed on IDEAS

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    Cited by:

    1. KAMGNA, Severin Yves, 2007. "Diversification économique en Afrique centrale : Etats des lieux et enseignements [Economic diversification in central Africa]," MPRA Paper 9602, University Library of Munich, Germany.

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