EconPapers    
Economics at your fingertips  
 

Growth Volatility and Trade: Market Diversification vs. Production Specialization

Adina Ardelean, Miguel Leon-Ledesma and Laura Puzzello ()

Studies in Economics from School of Economics, University of Kent

Abstract: We analyze how trade affects aggregate volatility using a multi-country, multi-industry, and multi-destination framework. We decompose aggregate output growth risk into destination risk, origin risk, and idiosyncratic risk (and their covariances). We then use this framework to run counterfactuals changing the degree of destination market diversification (including home) and industry specialization. Using data on 19 industrial sectors, 34 countries, and 85 destination markets for the 1980¨C2011 period, we find that destination risk dominates, followed by idiosyncratic risk. From the counterfactuals, we find that the effect of increased destination market diversifi- cation is quantitatively important in reducing aggregate volatility for high volatility countries. On the other hand, reducing specialization increases volatility.

Keywords: Output Volatility; Destination Shocks; Origin Shocks; Trade Diversification; Specialization (search for similar items in EconPapers)
JEL-codes: F15 F44 F61 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.kent.ac.uk/economics/repec/2202.pdf (application/pdf)

Related works:
Working Paper: Growth Volatility and Trade: Market Diversification vs. Production Specialization (2022) Downloads
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:ukc:ukcedp:2202

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Studies in Economics from School of Economics, University of Kent School of Economics, University of Kent, Canterbury, Kent, CT2 7FS.
Bibliographic data for series maintained by Dr Anirban Mitra ().

 
Page updated 2024-06-15
Handle: RePEc:ukc:ukcedp:2202