The Risk Content of Exports: A Portfolio View of International Trade

Julian di Giovanni and Andrei Levchenko

No 581, Working Papers from Research Seminar in International Economics, University of Michigan

Abstract: It has been suggested that countries whose exports are in especially risky sectors will experience higher output volatility. This paper develops a measure of the riskiness of a country's pattern of export specialization, and illustrates its features across countries and over time. The exercise reveals large cross-country differences in the risk content of exports. This measure is strongly correlated with the volatility of terms-of-trade, total exports, and output, but does not exhibit a close relationship to the level of income, overall trade openness, or other country characteristics. We then propose an explanation for what determines the risk content of exports, based on the theoretical literature exemplified by Turnovsky (1974). Countries with a comparative advantage in safe sectors or a strong enough comparative advantage in risky sectors will specialize, whereas countries whose comparative advantage in risky sectors is not too strong will diversify their export structure to insure against export income risk. We use both non-parametric and semiparametric techniques to demonstrate that these theoretical predictions are strongly supported by the data.

Keywords: trade; exports; risks (search for similar items in EconPapers)
Pages: 55 pages
Date: 2008-10
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.fordschool.umich.edu/rsie/workingpapers/Papers576-600/r581.pdf

Related works:
Journal Article: The Risk Content of Exports: A Portfolio View of International Trade (2012)
Chapter: The Risk Content of Exports: A Portfolio View of International Trade (2011)
Working Paper: The Risk Content of Exports: A Portfolio View of International Trade (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mie:wpaper:581

Access Statistics for this paper

More papers in Working Papers from Research Seminar in International Economics, University of Michigan Contact information at EDIRC.
Bibliographic data for series maintained by FSPP Webmaster ().