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Income volatility: whom you trade with matters

Marion Jansen (), Carolina Lennon and Roberta Piermartini

Review of World Economics (Weltwirtschaftliches Archiv), 2016, vol. 152, issue 1, 127-146

Abstract: Using a dataset of 165 countries over a period from 1971 to 2010, this paper studies how income volatility abroad affects income volatility at home. Relying on the Markowitz–Tobin definition of portfolio risk to international trade, we disentangle how volatility at home depends on volatility in individual trading partners and on the correlation among trading partners’ business cycles. As it has to be expected when entry new markets yields costs, we find that the correlation among trading partners’ business cycles matters more than the volatility of individual trading partners. These findings can provide useful guidance for export promotion strategies. Copyright Kiel Institute 2016

Keywords: Income volatility; Geographical export diversification; Openness; C23; F43; O19 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s10290-015-0238-5

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