1887

WTO Working Papers

WTO working papers usually represent research in progress. Such research may be conducted in the preparation of WTO Secretariat reports, studies or other material for WTO members. The papers are circulated for comment because the WTO considers critical review of professional research to be extremely important.

English

Exposure to External Country Specific Shocks and Income Volatility

Using a dataset of 138 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. Keywords: income volatility, geographical export diversification, external shocks.

English

Keywords: geographical export diversification, external shocks, income volatility
JEL: O19: Economic Development, Innovation, Technological Change, and Growth / Economic Development / International Linkages to Development; Role of International Organizations; F43: International Economics / Macroeconomic Aspects of International Trade and Finance / Economic Growth of Open Economies; C23: Mathematical and Quantitative Methods / Single Equation Models; Single Variables / Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error