Publication: Are External Shocks Responsible for the Instability of Output in Low Income Countries?
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2005-08
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2012-06-20
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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. The author quantifies the impact of these different external shocks using a panel vector autoregression (VAR) approach and compares their relative contributions to output volatility in low-income countries vis-à-vis internal factors. He finds that external shocks can only explain a small fraction of the output variance of a typical low-income country. Internal factors 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.
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“Raddatz, Claudio. 2005. Are External Shocks Responsible for the Instability of Output in Low Income Countries?. Policy Research Working Paper; No. 3680. © World Bank. http://hdl.handle.net/10986/8612 License: CC BY 3.0 IGO.”
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