Trade Openness Reduces Growth Volatility When Countries are Well Diversified

38 Pages Posted: 20 Apr 2016

See all articles by Mona Haddad

Mona Haddad

World Bank - EASPR

Jamus Jerome Lim

World Bank

Christian Saborowski

International Monetary Fund (IMF)

Multiple version iconThere are 3 versions of this paper

Date Written: February 1, 2010

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.

Keywords: Economic Conditions and Volatility, Achieving Shared Growth, Markets and Market Access, Free Trade, Emerging Markets

Suggested Citation

Haddad, Mona and Lim, Jamus Jerome and Saborowski, Christian, Trade Openness Reduces Growth Volatility When Countries are Well Diversified (February 1, 2010). World Bank Policy Research Working Paper No. 5222, Available at SSRN: https://ssrn.com/abstract=1565983

Mona Haddad (Contact Author)

World Bank - EASPR ( email )

United States

Jamus Jerome Lim

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Christian Saborowski

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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