Are external shocks responsible for the instability of output in low income countries?

2007. Journal of Development Economics. Volume 84, Issue 1, September 2007, Pages 155-187

Claudio Raddatz K

Abstract:

External shocks, such as commodity price fluctuations, natural disasters, and the role of the international economy, are often blamed for the poor economic performance of low-income countries. This paper quantifies the impact of these different external shocks using a panel vector auto-regression approach and determines their contributions to output volatility in low-income countries. We find that they can only explain a small fraction of the output variance of a typical low-income country. Other factors, most likely internal causes, are the main source of fluctuations. From a quantitative perspective, the output effect of external shocks is typically small in absolute terms, but significant relative to the historic performance of these countries.

Palabras claves: External shocks,  Economic fluctuations, Low-income countries, Terms-of-trade shocks, Natural disasters, Foreign aid.

Acceder a la publicación completa