Bejan, Maria (2006): Trade Openness and Output Volatility.
Download (299kB) | Preview
This paper studies the effect of trade openness on output volatility. We find that trade openness generally increased output volatility, although this effect was stronger and more significant during 1950-1975 than during 1975-2000. However, if we split the sample into developed and developing countries, we observe that more openness increased volatility in developing countries, while it helped smooth output in developed countries. We also find that the size of the government may have increased volatility in less developed countries. Part of the positive relation between openness and volatility may be explained by the positive relation between openness and government size. Another important finding of this paper is that once we control for government size and some measures of external risk, such as terms of trade volatility and export concentration index, the effect of openness on the output volatility turns out to be negative.
|Item Type:||MPRA Paper|
|Institution:||ITAM (Instituto Tecnologico Autonomo de Mexico)|
|Original Title:||Trade Openness and Output Volatility|
|Keywords:||Trade; Openness; Volatility|
|Subjects:||F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F40 - General
F - International Economics > F0 - General > F01 - Global Outlook
N - Economic History > N1 - Macroeconomics and Monetary Economics ; Industrial Structure ; Growth ; Fluctuations > N10 - General, International, or Comparative
|Depositing User:||Maria Bejan|
|Date Deposited:||17. Apr 2007|
|Last Modified:||18. Mar 2015 19:12|
• ANDERSON, H.M.; KWARK, N., VAHID, F.: ”Does International Trade Synchronize Business Cycles? ”, Monash University Working Paper 8 (1999) • BARRELL, R., GOTTSCHALK, S.: ”The Volatility of the Output Gap in the G7 ”, NIESR Working Paper (2004) • BREEN,R., PENALOSA,C.: ”Income Inequality and Macroeconomic Volatility”, forthcoming: Review of Development Economics • EASTERLY, W., ISLAM, R. and STIGLITZ, J.: ”Explaining Growth Volatility”, World Bank Working Paper (2000) • HARRISON, A.: ”Openness and Growth: A time-series cross-country analysis for developing countries”, Journal of Development Economics (1996) • Head, A.C., ”Country Size, Aggregate Fluctuations and International Risk Sharing” Canadian Journal of Economics, 28(4b) (1995) • IMBS, J.:”Why the Link Between Volatility and Growth is Both Positive and Negative”, CEPR Working Paper (2002) • JEREMY, D.: ”International Technology Transfer : Europe, Japan and the USA, 1700-1914” , Aldershot : Edward Elgar (1991) • KRAAY, A., VENTURA, J.: Trade Integration and Risk Sharing”, World Bank Working Paper, February (2002) • KORMENDI, R.C., MEGUIRE, P.G.: ”Macroeconomic Determinants of Growth (Cross-Country Evidence)”, Journal of Monetary Economics 16 (1995) • KREBS,T.,KRISHNA, P., MALONEY, B.: ”Trade Policy, Income Risk, and Welfare”, Brown University Working Paper (2004) • LEE, J.W.: ”International Trade, Distortions and Log-Run Economic Growth”, IMF Staff Papers no 40 (1993) • LEVINE, R. and RENELT, D.:”A Sensitivity Analysis of Cross-Country Growth Regressions”, World Bank Staff Paper (1992) • MOBARAK, A.M.: ”Determinants of Volatility and Implications for Economic Development”, Forthcoming (The Review of Economics and Statistics) • MOLANA,H., MONTAGNA,C., VIOLATO,M.: ”On the Causal Relationship between Trade-openness and Government Size: Evidence from 23 OECD Countries”, University of Dundee Discussion Paper no. 164 (2004) • RAMEY, G., RAMEY, V.: ”Cross-Country Evidence on the Link Between Volatility and Growth”, The American Economic Review, December 1995 • RAZIN, A., ROSE, A.: ”Business Cycle Volatility and Openness: An Exploratory Cross-Section Analysis”, NBER Working Paper No. 4208 (1992) • RODRIK, D.: ”Why Do More Open Economies Have Bigger Governments?”, Journal of Political Economy, 106(5) (1998) • RODRIK, D., RODRIGUEZ, F.: ”Trade Policy and Economic Growth: A Skeptic’s Guide to the Cross-National Evidence”, NBER Working Paper No. 7081 (1999) • SVALERYD, H., VLACHOS, J.: ”Markets for Risk and Openness to Trade: How Are They Related”, Journal of International Economics, 57(2000) • TAMIRISA, N.: ”Exchange and Capital Controls as Barriers to Trade”, IMF Staff Papers (1999) • TORNELL, A., WESTERMANN, F., MARTINEZ, L.: “Liberalization, Growth and Financial Crises: Lessons from Mexico and the Developing World”, Brookings Papers on Economic Activity No. 2 (2003) • WOLF, H.:”Accounting for Consumption Volatility Differences”, IMF Staff Papers 51(2004) • WU, C.H., RAPALLO, P.: ”Macroeconomic determinants of output growth volatility: a cross-country regression analysis 1961-1988 ”, Working Paper University of California, San Diego (1997)