Managing Openness and Volatility: The Role of Export Diversification

Mona Haddad (), Jamus Lim and Christian Saborowski ()
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Mona Haddad: World Bank
Christian Saborowski: World Bank

World Bank - Economic Premise, 2010, issue 6, 1-4

Abstract: As developing countries look to embrace an outward-oriented growth strategy, some may be concerned about the possibility that increased openness will be accompanied by increased volatility. However, although a more open economy may face increased volatility in its terms of trade, openness confers diversification benefits. In this note, we argue that export diversification is a key mitigating factor for the total effect of openness on volatility. More specifically, we show that most developing countries fall on the “good” side of a diversification threshold, where they are likely to experience less volatility as they pursue a strategy of greater openness.

Keywords: trade; openness; volatility; export; diversification; developing countries; trade policy; imports; terms of trade; development (search for similar items in EconPapers)
JEL-codes: F1 F13 F15 O1 O19 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:wbk:prmecp:ep6

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