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

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 (VA...

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Main Author:	Raddatz, Claudio
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ABSOLUTE TERMS ABSOLUTE VALUE ADVERSE SHOCKS AGGREGATE DEMAND AUTOREGRESSION AVERAGE GROWTH AVERAGE INCOME AVERAGE INCOME LEVEL BENCHMARK BUSINESS CYCLE BUSINESS CYCLES COUNTRY CHARACTERISTICS COUNTRY REGRESSIONS COUNTRY SPECIFIC COVARIANCE MATRIX CREDIT MARKET CURRENT ACCOUNT DAMAGES DEBT DEPENDENT VARIABLE DEVELOPING COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DYNAMIC RESPONSES ECONOMIC ACTIVITY ECONOMIC CONDITIONS ECONOMIC FLUCTUATIONS ECONOMIC GROWTH ECONOMIC IMPACT ECONOMIC PERFORMANCE ECONOMICS RESEARCH EMERGING MARKETS EMPIRICAL ANALYSIS EXCHANGE RATE EXCHANGE RATES EXOGENOUS SHOCKS EXOGENOUS VARIABLES EXPLANATORY POWER EXPORTS EXTERNAL CONDITIONS EXTERNAL FACTORS EXTERNAL SHOCK EXTERNAL SHOCKS FINANCIAL INSTITUTIONS FINANCIAL MARKETS FIXED EXCHANGE RATES FORECASTS FOREIGN AID FOREIGN CAPITAL GDP PER CAPITA GLOBAL ECONOMY GLOBAL LEVEL GROWTH RATES GROWTH REGRESSIONS HUMAN CAPITAL IDENTIFICATION ASSUMPTIONS INCOME INCOME DISTRIBUTION INCOME GROUP INCOME GROUPS INTEREST RATE INTEREST RATES INTERNAL FACTORS INTERNATIONAL MARKETS LATIN AMERICAN LDCS LOCAL CURRENCY LONG RUN LOW INCOME LOW-INCOME COUNTRIES MACROECONOMIC STABILITY MACROECONOMIC VARIABLES MACROECONOMICS MIDDLE INCOME COUNTRIES MIDDLE-INCOME COUNTRIES MONETARY POLICY NATIONAL ACCOUNTS NATIONAL INCOME NEGATIVE EFFECT NEGATIVE IMPACT NEGATIVE SHOCK NEGATIVE SHOCKS NOMINAL INTEREST RATE 0 HYPOTHESIS OUTPUT GROWTH OUTPUT VOLATILITY POINT ESTIMATE POINT ESTIMATES POLICY DEBATE POLICY RESEARCH POLITICAL INSTABILITY POOR COUNTRIES POOR COUNTRY POSITIVE EFFECT POSITIVE IMPACT PRICE FLUCTUATIONS PRICE INDEXES PRIMARY COMMODITIES REAL APPRECIATION REAL GDP REAL INTEREST REAL INTEREST RATE REAL OUTPUT RELATIVE CONTRIBUTION RELATIVE CONTRIBUTIONS RELATIVE IMPORTANCE RICH COUNTRIES SIGNIFICANT EFFECT SIGNIFICANT IMPACT SIGNIFICANT NEGATIVE STANDARD DEVIATION STRUCTURAL CHARACTERISTICS SUB-SAHARAN AFRICA TERMS OF TRADE TERMS-OF-TRADE SHOCKS TIME SERIES TOTAL OUTPUT WORLD INCOME DISTRIBUTION
Online Access:	http://documents.worldbank.org/curated/en/2005/08/6213769/external-shocks-responsible-instability-output-low-income-countries http://hdl.handle.net/10986/8612

id	okr-10986-8612
recordtype	oai_dc
spelling	okr-10986-86122021-04-23T14:02:43Z Are External Shocks Responsible for the Instability of Output in Low Income Countries? Raddatz, Claudio ABSOLUTE TERMS ABSOLUTE VALUE ADVERSE SHOCKS AGGREGATE DEMAND AUTOREGRESSION AVERAGE GROWTH AVERAGE INCOME AVERAGE INCOME LEVEL BENCHMARK BUSINESS CYCLE BUSINESS CYCLES COUNTRY CHARACTERISTICS COUNTRY REGRESSIONS COUNTRY SPECIFIC COVARIANCE MATRIX CREDIT MARKET CURRENT ACCOUNT DAMAGES DEBT DEPENDENT VARIABLE DEVELOPING COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DYNAMIC RESPONSES ECONOMIC ACTIVITY ECONOMIC CONDITIONS ECONOMIC FLUCTUATIONS ECONOMIC GROWTH ECONOMIC IMPACT ECONOMIC PERFORMANCE ECONOMICS RESEARCH EMERGING MARKETS EMPIRICAL ANALYSIS EXCHANGE RATE EXCHANGE RATES EXOGENOUS SHOCKS EXOGENOUS VARIABLES EXPLANATORY POWER EXPORTS EXTERNAL CONDITIONS EXTERNAL FACTORS EXTERNAL SHOCK EXTERNAL SHOCKS FINANCIAL INSTITUTIONS FINANCIAL MARKETS FIXED EXCHANGE RATES FORECASTS FOREIGN AID FOREIGN CAPITAL GDP PER CAPITA GLOBAL ECONOMY GLOBAL LEVEL GROWTH RATES GROWTH REGRESSIONS HUMAN CAPITAL IDENTIFICATION ASSUMPTIONS INCOME INCOME DISTRIBUTION INCOME GROUP INCOME GROUPS INTEREST RATE INTEREST RATES INTERNAL FACTORS INTERNATIONAL MARKETS LATIN AMERICAN LDCS LOCAL CURRENCY LONG RUN LOW INCOME LOW-INCOME COUNTRIES MACROECONOMIC STABILITY MACROECONOMIC VARIABLES MACROECONOMICS MIDDLE INCOME COUNTRIES MIDDLE-INCOME COUNTRIES MONETARY POLICY NATIONAL ACCOUNTS NATIONAL INCOME NEGATIVE EFFECT NEGATIVE IMPACT NEGATIVE SHOCK NEGATIVE SHOCKS NOMINAL INTEREST RATE 0 HYPOTHESIS OUTPUT GROWTH OUTPUT VOLATILITY POINT ESTIMATE POINT ESTIMATES POLICY DEBATE POLICY RESEARCH POLITICAL INSTABILITY POOR COUNTRIES POOR COUNTRY POSITIVE EFFECT POSITIVE IMPACT PRICE FLUCTUATIONS PRICE INDEXES PRIMARY COMMODITIES REAL APPRECIATION REAL GDP REAL INTEREST REAL INTEREST RATE REAL OUTPUT RELATIVE CONTRIBUTION RELATIVE CONTRIBUTIONS RELATIVE IMPORTANCE RICH COUNTRIES SIGNIFICANT EFFECT SIGNIFICANT IMPACT SIGNIFICANT NEGATIVE STANDARD DEVIATION STRUCTURAL CHARACTERISTICS SUB-SAHARAN AFRICA TERMS OF TRADE TERMS-OF-TRADE SHOCKS TIME SERIES TOTAL OUTPUT WORLD INCOME DISTRIBUTION 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. 2012-06-20T22:26:03Z 2012-06-20T22:26:03Z 2005-08 http://documents.worldbank.org/curated/en/2005/08/6213769/external-shocks-responsible-instability-output-low-income-countries http://hdl.handle.net/10986/8612 English Policy Research Working Paper; No. 3680 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ABSOLUTE TERMS ABSOLUTE VALUE ADVERSE SHOCKS AGGREGATE DEMAND AUTOREGRESSION AVERAGE GROWTH AVERAGE INCOME AVERAGE INCOME LEVEL BENCHMARK BUSINESS CYCLE BUSINESS CYCLES COUNTRY CHARACTERISTICS COUNTRY REGRESSIONS COUNTRY SPECIFIC COVARIANCE MATRIX CREDIT MARKET CURRENT ACCOUNT DAMAGES DEBT DEPENDENT VARIABLE DEVELOPING COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DYNAMIC RESPONSES ECONOMIC ACTIVITY ECONOMIC CONDITIONS ECONOMIC FLUCTUATIONS ECONOMIC GROWTH ECONOMIC IMPACT ECONOMIC PERFORMANCE ECONOMICS RESEARCH EMERGING MARKETS EMPIRICAL ANALYSIS EXCHANGE RATE EXCHANGE RATES EXOGENOUS SHOCKS EXOGENOUS VARIABLES EXPLANATORY POWER EXPORTS EXTERNAL CONDITIONS EXTERNAL FACTORS EXTERNAL SHOCK EXTERNAL SHOCKS FINANCIAL INSTITUTIONS FINANCIAL MARKETS FIXED EXCHANGE RATES FORECASTS FOREIGN AID FOREIGN CAPITAL GDP PER CAPITA GLOBAL ECONOMY GLOBAL LEVEL GROWTH RATES GROWTH REGRESSIONS HUMAN CAPITAL IDENTIFICATION ASSUMPTIONS INCOME INCOME DISTRIBUTION INCOME GROUP INCOME GROUPS INTEREST RATE INTEREST RATES INTERNAL FACTORS INTERNATIONAL MARKETS LATIN AMERICAN LDCS LOCAL CURRENCY LONG RUN LOW INCOME LOW-INCOME COUNTRIES MACROECONOMIC STABILITY MACROECONOMIC VARIABLES MACROECONOMICS MIDDLE INCOME COUNTRIES MIDDLE-INCOME COUNTRIES MONETARY POLICY NATIONAL ACCOUNTS NATIONAL INCOME NEGATIVE EFFECT NEGATIVE IMPACT NEGATIVE SHOCK NEGATIVE SHOCKS NOMINAL INTEREST RATE 0 HYPOTHESIS OUTPUT GROWTH OUTPUT VOLATILITY POINT ESTIMATE POINT ESTIMATES POLICY DEBATE POLICY RESEARCH POLITICAL INSTABILITY POOR COUNTRIES POOR COUNTRY POSITIVE EFFECT POSITIVE IMPACT PRICE FLUCTUATIONS PRICE INDEXES PRIMARY COMMODITIES REAL APPRECIATION REAL GDP REAL INTEREST REAL INTEREST RATE REAL OUTPUT RELATIVE CONTRIBUTION RELATIVE CONTRIBUTIONS RELATIVE IMPORTANCE RICH COUNTRIES SIGNIFICANT EFFECT SIGNIFICANT IMPACT SIGNIFICANT NEGATIVE STANDARD DEVIATION STRUCTURAL CHARACTERISTICS SUB-SAHARAN AFRICA TERMS OF TRADE TERMS-OF-TRADE SHOCKS TIME SERIES TOTAL OUTPUT WORLD INCOME DISTRIBUTION
spellingShingle	ABSOLUTE TERMS ABSOLUTE VALUE ADVERSE SHOCKS AGGREGATE DEMAND AUTOREGRESSION AVERAGE GROWTH AVERAGE INCOME AVERAGE INCOME LEVEL BENCHMARK BUSINESS CYCLE BUSINESS CYCLES COUNTRY CHARACTERISTICS COUNTRY REGRESSIONS COUNTRY SPECIFIC COVARIANCE MATRIX CREDIT MARKET CURRENT ACCOUNT DAMAGES DEBT DEPENDENT VARIABLE DEVELOPING COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DYNAMIC RESPONSES ECONOMIC ACTIVITY ECONOMIC CONDITIONS ECONOMIC FLUCTUATIONS ECONOMIC GROWTH ECONOMIC IMPACT ECONOMIC PERFORMANCE ECONOMICS RESEARCH EMERGING MARKETS EMPIRICAL ANALYSIS EXCHANGE RATE EXCHANGE RATES EXOGENOUS SHOCKS EXOGENOUS VARIABLES EXPLANATORY POWER EXPORTS EXTERNAL CONDITIONS EXTERNAL FACTORS EXTERNAL SHOCK EXTERNAL SHOCKS FINANCIAL INSTITUTIONS FINANCIAL MARKETS FIXED EXCHANGE RATES FORECASTS FOREIGN AID FOREIGN CAPITAL GDP PER CAPITA GLOBAL ECONOMY GLOBAL LEVEL GROWTH RATES GROWTH REGRESSIONS HUMAN CAPITAL IDENTIFICATION ASSUMPTIONS INCOME INCOME DISTRIBUTION INCOME GROUP INCOME GROUPS INTEREST RATE INTEREST RATES INTERNAL FACTORS INTERNATIONAL MARKETS LATIN AMERICAN LDCS LOCAL CURRENCY LONG RUN LOW INCOME LOW-INCOME COUNTRIES MACROECONOMIC STABILITY MACROECONOMIC VARIABLES MACROECONOMICS MIDDLE INCOME COUNTRIES MIDDLE-INCOME COUNTRIES MONETARY POLICY NATIONAL ACCOUNTS NATIONAL INCOME NEGATIVE EFFECT NEGATIVE IMPACT NEGATIVE SHOCK NEGATIVE SHOCKS NOMINAL INTEREST RATE 0 HYPOTHESIS OUTPUT GROWTH OUTPUT VOLATILITY POINT ESTIMATE POINT ESTIMATES POLICY DEBATE POLICY RESEARCH POLITICAL INSTABILITY POOR COUNTRIES POOR COUNTRY POSITIVE EFFECT POSITIVE IMPACT PRICE FLUCTUATIONS PRICE INDEXES PRIMARY COMMODITIES REAL APPRECIATION REAL GDP REAL INTEREST REAL INTEREST RATE REAL OUTPUT RELATIVE CONTRIBUTION RELATIVE CONTRIBUTIONS RELATIVE IMPORTANCE RICH COUNTRIES SIGNIFICANT EFFECT SIGNIFICANT IMPACT SIGNIFICANT NEGATIVE STANDARD DEVIATION STRUCTURAL CHARACTERISTICS SUB-SAHARAN AFRICA TERMS OF TRADE TERMS-OF-TRADE SHOCKS TIME SERIES TOTAL OUTPUT WORLD INCOME DISTRIBUTION Raddatz, Claudio Are External Shocks Responsible for the Instability of Output in Low Income Countries?
relation	Policy Research Working Paper; No. 3680
description	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.
format	Publications & Research :: Policy Research Working Paper
author	Raddatz, Claudio
author_facet	Raddatz, Claudio
author_sort	Raddatz, Claudio
title	Are External Shocks Responsible for the Instability of Output in Low Income Countries?
title_short	Are External Shocks Responsible for the Instability of Output in Low Income Countries?
title_full	Are External Shocks Responsible for the Instability of Output in Low Income Countries?
title_fullStr	Are External Shocks Responsible for the Instability of Output in Low Income Countries?
title_full_unstemmed	Are External Shocks Responsible for the Instability of Output in Low Income Countries?
title_sort	are external shocks responsible for the instability of output in low income countries?
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2005/08/6213769/external-shocks-responsible-instability-output-low-income-countries http://hdl.handle.net/10986/8612
_version_	1764407642282786816

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

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