Working Paper: CEPR ID: DP7123
Authors: Marion Jansen; Carolina Lennon; Roberta Piermartini
Abstract: 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.
Keywords: Export Diversification; External Shocks; Income Volatility
JEL Codes: C23; F43; O19
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| exposure to country specific shocks (F41) | GDP volatility (E39) |
| covariance component of exposure to country specific shocks (C21) | GDP volatility (E39) |
| geographical diversification of exports (F10) | exposure to country specific shocks (F41) |