Sources of Volatility in Small Economies

Hnatkovska, Viktoria ; Koehler-Geib, Fritzi

World Bank, Washington, DC

关键词: SMALL STATES;    VOLATILITY;    BUSINESS CYCLE;    VAR;    FISCAL POLICY;   

DOI  :  10.1596/1813-9450-8526
RP-ID  :  WPS8526

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Do sources of volatility differ bycountry characteristics such as the level of development,country size, quality of institutions, and presence ofrestrictions on fiscal policy? This paper sets out to answerthis question in a quarterly panel of 48 developed anddeveloping countries for 1960-2015. Using individual countryand panel vector autoregressions, the paper shows thatfactors affecting gross domestic product volatility differsystematically by country size, development level, andwhether a country has adopted fiscal rule(s). The role ofcountry size is particularly pronounced in developingcountries. The paper shows that small developing countriesare more prone to domestic output shocks, while shocks tothe world interest rate and real exchange rate are moreimportant in large developing countries. Small countries arealso more susceptible to terms of trade shocks. Theseresults suggest that stabilization policies must be designedwith these country characteristics in mind.