Openness, Specialization, and the External Vulnerability of Developing Countries

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dc.creatorBarrot, Luis-Diego
dc.creatorCalderon, Cesar
dc.creatorServen, Luis
dc.date2016-07-07T20:07:00Z
dc.date2016-07-07T20:07:00Z
dc.date2016-06
dc.date.accessioned2026-07-01T00:47:06Z
dc.descriptionDeepening real and financial integration of developing countries into the world economy has prompted renewed interest in the contribution of external shocks to their macroeconomic fluctuations. This paper revisits the issue using four decades of annual data for a large sample of developing countries. The paper implements a conditionally-homogeneous panel vector autoregression with exogenous variables to model GDP fluctuations in these countries. It uses sign restrictions to identify four external structural shocks -– demand, supply, monetary, and commodity shocks -– and analyzes how their impact on growth is shaped by countries' policy and structural framework. External shocks are found to account for a small share of the forecast error variance of GDP, especially at short horizons. However, their contribution has been on the rise in recent decades. Further, global monetary shocks have become the leading external source of GDP volatility in developing countries. The paper presents a quantitative assessment of the effects of real and financial opening up, as well as those of commodity specialization, on the impact of external shocks on GDP. The results suggest that increasing openness can account for the increasing trend in the volatility attributable to external shocks, as well as the changing roles of different shocks. Moreover, commodity-intensive developing countries are found to be more vulnerable than the rest to all types of external shocks, not just commodity shocks.
dc.formatapplication/pdf
dc.formattext/plain
dc.identifierhttp://documents.worldbank.org/curated/en/2016/06/26506942/openness-specialization-external-vulnerability-developing-countries
dc.identifierhttps://hdl.handle.net/10986/24628
dc.identifier10.1596/1813-9450-7711
dc.identifier.urihttp://hdl.handle.net/123456789/410951
dc.languageEnglish
dc.languageen_US
dc.publisherWorld Bank, Washington, DC
dc.relationPolicy Research Working Paper;No. 7711
dc.rightsCC BY 3.0 IGO
dc.rightshttp://creativecommons.org/licenses/by/3.0/igo/
dc.rightsWorld Bank
dc.subjectINTERNATIONAL INTEREST RATE
dc.subjectMONETARY POLICY
dc.subjectREAL SHOCKS
dc.subjectECONOMIC ENVIRONMENT
dc.subjectTRADE SHOCK
dc.subjectSMALL ECONOMIES
dc.subjectCLOSED ECONOMIES
dc.subjectMULTIPLIERS
dc.subjectADJUSTMENT PATH
dc.subjectRELATIVE PRICE
dc.subjectLAGS
dc.subjectSUPPLY CURVE
dc.subjectSHORT-TERM INTEREST RATES
dc.subjectGLOBAL MARKETS
dc.subjectINCOME
dc.subjectINTEREST
dc.subjectDYNAMIC ADJUSTMENT
dc.subjectEMERGING ECONOMIES
dc.subjectINTEREST RATE
dc.subjectREAL GDP
dc.subjectEXCHANGE
dc.subjectGDP PER CAPITA
dc.subjectDEVELOPING COUNTRIES
dc.subjectEXPORTS
dc.subjectDEVELOPING ECONOMIES
dc.subjectEXPORTERS
dc.subjectECONOMIC STRUCTURE
dc.subjectINTERNATIONAL BUSINESS
dc.subjectBONDS
dc.subjectVARIABLES
dc.subjectTRADE OPENNESS
dc.subjectPRICE
dc.subjectINTERNATIONAL INTEREST
dc.subjectFINANCIAL INTEGRATION
dc.subjectTREASURY BILL
dc.subjectINFLATION
dc.subjectTRENDS
dc.subjectEMERGING MARKET ECONOMIES
dc.subjectADVANCED COUNTRIES
dc.subjectINTERNATIONAL FINANCE
dc.subjectSTANDARD DEVIATION
dc.subjectINTERNATIONAL INTEREST RATES
dc.subjectCAPITAL OUTFLOW
dc.subjectEXCHANGE RATE REGIME
dc.subjectFINANCIAL VARIABLES
dc.subjectENDOGENOUS VARIABLE
dc.subjectEXOGENOUS SHOCKS
dc.subjectPRODUCTION STRUCTURE
dc.subjectCURRENCY
dc.subjectTRADE SHOCKS
dc.subjectDEVELOPMENT ECONOMICS
dc.subjectCOVARIANCE MATRIX
dc.subjectSTRUCTURAL SHOCK
dc.subjectREAL GDP
dc.subjectADVANCED ECONOMIES
dc.subjectEXOGENOUS VARIABLES
dc.subjectSTRUCTURAL SHOCKS
dc.subjectLOW-INCOME COUNTRIES
dc.subjectCURRENT ACCOUNT
dc.subjectCURRENT ACCOUNT SURPLUS
dc.subjectSURPLUS
dc.subjectEXCHANGE RATES
dc.subjectECONOMETRICS
dc.subjectINTEREST RATES
dc.subjectINTEREST RATE SHOCKS
dc.subjectSUPPLY SHOCKS
dc.subjectGLOBALIZATION
dc.subjectNATURAL DISASTERS
dc.subjectLOW- INCOME COUNTRIES
dc.subjectEMERGING MARKET
dc.subjectCRITERIA
dc.subjectNET EXPORTS
dc.subjectMONETARY TRANSMISSION
dc.subjectDEBT
dc.subjectDOMESTIC INTEREST RATE
dc.subjectIMPORTS
dc.subjectSUPPLY SHOCK
dc.subjectCOMMODITY PRICE
dc.subjectFOREIGN CURRENCY
dc.subjectLIBERALIZATION
dc.subjectMARKET ECONOMIES
dc.subjectWORLD INTEREST RATES
dc.subjectEMERGING MARKETS
dc.subjectDATA AVAILABILITY
dc.subjectCAPITAL
dc.subjectFINANCIAL TRANSACTIONS
dc.subjectVOLATILITY
dc.subjectBARRIERS
dc.subjectVALUE
dc.subjectMACROECONOMICS
dc.subjectWORLD ECONOMY
dc.subjectDEMAND
dc.subjectAGGREGATE DEMAND
dc.subjectECONOMIC FLUCTUATIONS
dc.subjectECONOMY
dc.subjectAGRICULTURE
dc.subjectEXCESS DEMAND
dc.subjectCLOSED CAPITAL ACCOUNT
dc.subjectRESPONSE TO SHOCKS
dc.subjectASSETS
dc.subjectGLOBAL INFLATION
dc.subjectEXCHANGE RATE REGIME
dc.subjectENDOGENOUS VARIABLES
dc.subjectCAPITAL ACCOUNT OPENNESS
dc.subjectTREASURY
dc.subjectOUTPUT
dc.subjectPRIMARY COMMODITIES
dc.subjectEXPOSURE
dc.subjectBUSINESS CYCLES
dc.subjectBILL
dc.subjectTRADE
dc.subjectGDP
dc.subjectGOODS
dc.subjectINVESTOR
dc.subjectTHEORY
dc.subjectDOMESTIC ECONOMY
dc.subjectGROWTH RATE
dc.subjectOIL EXPORTERS
dc.subjectNATURAL RESOURCE
dc.subjectRISK
dc.subjectSHARE
dc.subjectCOMPARATIVE ADVANTAGE
dc.subjectGLOBAL OUTPUT
dc.subjectSHORT-TERM INTEREST RATE
dc.subjectAUTOREGRESSION
dc.subjectSUPPLY
dc.subjectGLOBAL DEMAND
dc.subjectDECLINE IN INFLATION
dc.subjectEXTERNAL SHOCKS
dc.subjectCYCLICAL ADJUSTMENT
dc.subjectCOMMODITIES
dc.subjectEXCHANGE RATE
dc.subjectGDP DEFLATOR
dc.subjectCOMMODITY PRICES
dc.subjectOPEN ECONOMIES
dc.subjectCOMMODITY
dc.subjectADVERSE EFFECTS
dc.subjectCAPITAL ACCOUNT
dc.subjectFINANCIAL OPENNESS
dc.subjectINFLATION EPISODES
dc.subjectPRICES
dc.subjectEXCHANGE RATE REGIMES
dc.subjectECONOMIES
dc.subjectDEVELOPMENT POLICY
dc.titleOpenness, Specialization, and the External Vulnerability of Developing Countries
dc.typeWorking Paper
dc.typeDocument de travail
dc.typeDocumento de trabajo

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