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

Julian di Giovanni and Andrei Levchenko

No 16005, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: It has been suggested that countries which export 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 terms-of-trade and output volatility, 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 comparative advantage in the safe sectors or strong enough comparative advantage in the risky sectors will specialize, whereas countries whose comparative advantage in the risky sectors is not too strong will diversify their export structure to insure against export income risk. We use both non-parametric and parametric techniques to demonstrate that these theoretical predictions are strongly supported by the data.

JEL-codes: F15 F40 (search for similar items in EconPapers)
Date: 2010-05
Note: IFM ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published as Julian di Giovanni & Andrei A. Levchenko, 2012. "The Risk Content of Exports: A Portfolio View of International Trade," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 8(1), pages 97 - 151.
Published as The Risk Content of Exports: A Portfolio View of International Trade , Julian di Giovanni, Andrei A. Levchenko. in NBER International Seminar on Macroeconomics 2011 , Frankel and Pissarides. 2012

Downloads: (external link)
http://www.nber.org/papers/w16005.pdf (application/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 (2008)
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:nbr:nberwo:16005

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w16005

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().