Caselli, Francesco 
ORCID: 0009-0001-5191-7156, Koren, Miklos, Lisicky, Milan and Tenreyro, Silvana ORCID: 0000-0002-9816-7452
(2015)
Diversification through trade.
CEP Discussion Paper (1388).
London School of Economics and Political Science. Centre for Economic Performance, London, UK.
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Abstract
A widely held view is that openness to international trade leads to higher GDP volatility, as trade increases specialization and hence exposure to sector-specific shocks. We revisit the common wisdom and argue that when country-wide shocks are important, openness to international trade can lower GDP volatility by reducing exposure to domestic shocks and allowing countries to diversify the sources of demand and supply across countries. Using a quantitative model of trade, we assess the importance of the two mechanisms (sectoral specialization and cross-country diversification) and provide a new answer to the question of whether and how international trade affects economic volatility.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | http://cep.lse.ac.uk/ |
| Additional Information: | © 2015 The Authors |
| Divisions: | Centre for Economic Performance |
| Subjects: | H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HF Commerce |
| JEL classification: | E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles F - International Economics > F0 - General |
| Date Deposited: | 14 Jan 2016 16:52 |
| Last Modified: | 11 Dec 2024 19:19 |
| Funders: | Economic and Social Research Council |
| URI: | http://eprints.lse.ac.uk/id/eprint/65009 |
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