Trade Openness Reduces Growth Volatility When Countries Are Well Diversified [electronic resource] / Saborowski, Christian
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TextPublication details: Washington, D.C., The World Bank, 2010Description: 1 online resource (38 p.)Subject(s): Achieving Shared Growth | Developing countries | Economic activity | Economic Conditions and Volatility | Economic crisis | Economic development | Economic growth | Economic management | Emerging Markets | External shocks | Financial markets | Fluctuations | Free Trade | Growth effect | Growth effects | Growth process | Growth rates | Growth volatility | Interest rates | International Economics and Trade | International trade | Liberalization | Macroeconomic volatility | Macroeconomics and Economic Growth | Markets and Market Access | Poverty Reduction | Private Sector Development | Structural characteristics | Trade opennessAdditional physical formats: Saborowski, Christian.: Trade Openness Reduces Growth Volatility When Countries Are Well Diversified.Online resources: Click here to access online Abstract: This paper addresses the mechanisms by which trade openness affects growth volatility. Using a diverse set of export diversification indicators, it presents strong evidence pointing to an important role for export diversification in reducing the effect of trade openness on growth volatility. The authors also identify positive thresholds for product diversification at which the effect of openness on volatility changes sign. The effect is shown to be positive only for a minority of countries with highly concentrated export baskets. This result is shown to be robust to both explicit accounting for endogeneity as well as the inclusion of a host of additional controls.
This paper addresses the mechanisms by which trade openness affects growth volatility. Using a diverse set of export diversification indicators, it presents strong evidence pointing to an important role for export diversification in reducing the effect of trade openness on growth volatility. The authors also identify positive thresholds for product diversification at which the effect of openness on volatility changes sign. The effect is shown to be positive only for a minority of countries with highly concentrated export baskets. This result is shown to be robust to both explicit accounting for endogeneity as well as the inclusion of a host of additional controls.
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