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Exposure to External Country Specific Shocks and Income Volatility

Marion Jansen, Roberta Piermartini and Carolina Lennon

No 7123, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 (search for similar items in EconPapers)
JEL-codes: C23 F43 O19 (search for similar items in EconPapers)
Date: 2009-01
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Citations: View citations in EconPapers (10)

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