 Safer trade among democracies? Downward trade volatility and political regimes (1962-2018)Dario Pellegrino ()
No 1497, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area Abstract: This paper examines the trade relations of the G7 countries from 1962 to 2018, categorising trade partners based on their political systems. First, it analyses trade openness depending on whether partners are democracies. Second, the paper introduces a trade risk measure related to a partner's political system, defined as the downward volatility of trade flows. This measure accounts for both the likelihood and severity of potential trade disruptions. The study finds that trade among democracies has shown less downward volatility than trade with non-democratic regimes. This finding continues to hold even after accounting for important characteristics of the trading partners, such as their level of development and the types of goods traded (primary products, manufactured goods, or exports). The lower volatility associated with democratic regimes is likely due to stronger institutional limits on executive power, which may lead to more stable policies and business environments. Keywords: trade volatility; international trade history; friendshoring; political regimes; executive constraints (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1497_25 Access Statistics for this paper More papers in Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC. |
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