The Economic Consequences of Export Instability in Developing Countries: A Survey

Abstract

In this note we provide a brief survey of the literature about the effects of exports instability in developing countries, mainly focused on commodity dependent economies. Whatever the nature of instability, exports instability generate major disturbances in those economies. Exports instability is often considered as a major source of macroeconomic instability that is welfare costly. Exports instability is also risk generating for individual economic agents who take it into account in their economic decisions but cannot get rid of it in the absence of appropriate credit and insurance devices. We thus examine the macroeconomic consequences of export instability, first in the short term, using the Dutch Disease framework, and second its effects on growth. We then examine the effects of instability from a microeconomic point of view.

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