Are External Shocks Responsible for the Instability of Output in Low-Income Countries?

By Claudio E. Raddatz. 2005

696 citations recorded by the source corpus.

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-a-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.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/b90c87c6082b17d8312f676f570dbdbc86313760

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Finance

Citations in the corpus

Disasters and Development: Natural Disasters, Credit Constraints and Economic Growth (2014, neutral): “A panel VAR model (as used in Raddatz, 2007; 2009) or a system GMM (as used in Levine et al. 2000; and Loayza et al. 2009) would allow for the inclusion of these type of control variables.”
Natural disasters' impact, factors of resilience and development: A meta-analysis of the macroeconomic literature (2014, methodology): “For example, Rasmussen (2004) and Heger et al.”
The Growth Aftermath of Natural Disasters (2009, positive): “Using a panel vector auto-regression model, Raddatz (2007) examined the dynamic impacts of external shocks, including natural disasters, on the volatility of output.”
The Structural Determinants of External Vulnerability (2006, neutral): “Terms-of-trade shocks have also been documented to have a significant impact on GDP within countries (see Ahmed 2003, and Raddatz, 2005, among others), although on this front the evidence of their relative importance vis-à-vis domestic shocks is more controversial.”
Public Investment, Growth, and Debt Sustainability: Putting Together the Pieces (2012, background): “(2)For example, Redifer (2010) points out that the four East African countries with new Fund’s Policy Support Instrument Programs (Mozambique, Rwanda, Tanzania, and Uganda), official aid has on average not increased in line with public investment spending and is not projected to do so in the next th”
The Local Impact of Mining on Poverty and Inequality: Evidence from the Commodity Boom in Peru (2016, background): “However, studies exploiting both cross-sectional and time-series variation find no effect or even a positive one (Manzano and Rigobon, 2006; Raddatz, 2007).”
The economic growth impact of natural disasters in developing countries: Evidence from hurricane strikes in the Central American and Caribbean regions (2012, background): “considerably. For instance, Raddatz (2007) investigated the role that external shocks played in a”
Remittances and Vulnerability in Developing Countries (2014, background): “In addition, over the past decades developing countries have been increasingly subject to natural disasters, again with severe consequences in terms of output, trade, and fiscal balances (Raddatz, 2007; Noy, 2009).”