Exposure to External Country Specific Shocks and Income Volatility

25 Pages Posted: 18 Feb 2009

See all articles by Marion Jansen

Marion Jansen

International Trade Centre

Carolina Lennon

Université Paris I Panthéon-Sorbonne

Roberta Piermartini

World Trade Organization (WTO) - Economic Research and Analysis Division

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Date Written: January 2009

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 Classification: C23, F43, O19

Suggested Citation

Jansen, Marion and Lennon, Carolina and Piermartini, Roberta, Exposure to External Country Specific Shocks and Income Volatility (January 2009). CEPR Discussion Paper No. DP7123, Available at SSRN: https://ssrn.com/abstract=1345649

Marion Jansen (Contact Author)

International Trade Centre ( email )

54-56 Rue de Montbrillant
Geneva
Switzerland

Carolina Lennon

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005
France

Roberta Piermartini

World Trade Organization (WTO) - Economic Research and Analysis Division ( email )

Rue de Lausanne 154
CH-1211 Geneva
Switzerland
+41 22 739 5492 (Phone)
+41 22 739 5762 (Fax)

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