Haddad, MonaLim, Jamus JeromeSaborowski, Christian2012-08-132012-08-132010-03https://hdl.handle.net/10986/10203As developing countries look to embrace an outward-oriented growth strategy, some may be concerned about the possibility that increased openness will be accompanied by increased volatility. However, although a more open economy may face increased volatility in its terms of trade, openness confers diversification benefits. In this note, authors argue that export diversification is a key mitigating factor for the total effect of openness on volatility. More specifically, authors show that most developing countries fall on the "good" side of a diversification threshold, where they are likely to experience less volatility as they pursue a strategy of greater openness.CC BY 3.0 IGOCOMPARATIVE ADVANTAGEDEMAND SHOCKSDEVELOPED COUNTRIESDEVELOPING COUNTRIESDEVELOPMENT STRATEGYDIVERSIFICATION BENEFITSDOMESTIC MARKETDOMESTIC PRODUCERSECONOMIC MANAGEMENTECONOMIC POLICYECONOMIC RESOURCESEMPIRICAL MODELEXPORT BASEEXPORT DIVERSIFICATIONEXPORT MARKETEXPORT SECTOREXPORT SHAREEXPORT SHARESEXPORTSFINANCIAL CRISISFOREIGN MARKETFOREIGN MARKETSFOREIGN TECHNOLOGYGOVERNMENT ACTIONGROWTH VOLATILITYHOME MARKETIMPORT MARKETSINCOME GROUPINCOMESINSURANCEINTERMEDIATE INPUTSINTERNATIONAL DIVERSIFICATIONINTERNATIONAL TRADEINVESTMENT PORTFOLIOLIBERALIZATIONMARKET ACCESSMARKET CONDITIONSMARKET DIVERSIFICATIONMARKET ENTRYNATIONAL INCOMENEW MARKETSOPEN ECONOMYOUTPUTOVERALL VOLATILITYPER CAPITA INCOMESPOLICY MAKERSPOLICY RESEARCHPOVERTY REDUCTIONPRIVATE SECTORRED TAPERISK MANAGEMENTSIGNIFICANT EFFECTSPECIALIZATIONTERMS OF TRADETRADE FACILITATIONTRADE OPENNESSVOLATILITYWorld Bank10.1596/10203