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This paper examines the growth effects of different dimensions of international trade integration-notably, volume, diversification, and natural resource dependence-in Sub-Saharan Africa. First, the paper documents the recent trends in these foreign trade dimensions for the region and the traditional sources of growth. Second, it empirically estimates the impact of trade integration on growth per worker and the sources of growth; that is, growth of capital per worker and total factor productivity growth. To accomplish this task, the analysis uses a sample of non-overlapping five-year period observations for 173 countries from 1975 to 2014. The econometric evidence shows that increased trade openness, greater export production diversification, and reduced export dependence from natural resources will have a positive causal impact on economic growth. These effects will be mainly transmitted through faster capital accumulation or enhanced total factor productivity growth. Finally, the paper finds that, despite the progress exhibited in trade openness and diversification over the past decade, there are still potential benefits that can be accrued if countries were to deepen their integration to world trade.

Coastal and Marine Resources --- Diversification --- Economic Growth --- Economic Theory and Research --- Energy and Natural Resources --- Growth --- Industrial Economics --- Industry --- International Economics and Trade --- International Trade and Trade Rules --- Natural Resources --- Trade and Services --- Trade Openness --- Water Resources

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This paper evaluates the degree of consumption insurance enjoyed by Latin American and Caribbean countries, with respect to various reference areas, by estimating a parameter expressing the sensitivity of a country's consumption growth to a measure of idiosyncratic shocks to income. The paper surveys common econometric implementations of "consumption insurance tests." The author proposes some econometric procedures in order to detect the actual presence of international risk sharing, as well as to assess the relative impact of idiosyncratic versus aggregate shocks. The evidence suggests that Latin American and Caribbean economies have been hit by non-diversifiable income shocks, that idiosyncratic risk is relatively more important than aggregate risk, and that some countries in the region appear to enjoy a certain amount of international risk diversification. The paper also identifies some macroeconomic factors that may be responsible for a higher or lower degree of risk pooling (such as international openness, financial depth, and credit availability). The findings show that the financial development of an economy is a crucial factor in determining the amount of risk sharing opportunities, as well as public expenditure. The preliminary results also suggest that trade openness and shocks to terms of trade play an important role in determining the degree of insurability of such risks.

Aggregate consumption --- Aggregate income --- Consumption --- Consumption growth --- Currencies and Exchange Rates --- Domestic consumption --- Economic Theory and Research --- Finance and Financial Sector Development --- Financial Intermediation --- Growth rates --- Income growth --- Inequality --- Levels of investments --- Macroeconomics and Economic Growth --- National income --- Poverty Reduction --- Public expenditure --- Trade openness

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This paper evaluates the degree of consumption insurance enjoyed by Latin American and Caribbean countries, with respect to various reference areas, by estimating a parameter expressing the sensitivity of a country's consumption growth to a measure of idiosyncratic shocks to income. The paper surveys common econometric implementations of "consumption insurance tests." The author proposes some econometric procedures in order to detect the actual presence of international risk sharing, as well as to assess the relative impact of idiosyncratic versus aggregate shocks. The evidence suggests that Latin American and Caribbean economies have been hit by non-diversifiable income shocks, that idiosyncratic risk is relatively more important than aggregate risk, and that some countries in the region appear to enjoy a certain amount of international risk diversification. The paper also identifies some macroeconomic factors that may be responsible for a higher or lower degree of risk pooling (such as international openness, financial depth, and credit availability). The findings show that the financial development of an economy is a crucial factor in determining the amount of risk sharing opportunities, as well as public expenditure. The preliminary results also suggest that trade openness and shocks to terms of trade play an important role in determining the degree of insurability of such risks.

Aggregate consumption --- Aggregate income --- Consumption --- Consumption growth --- Currencies and Exchange Rates --- Domestic consumption --- Economic Theory and Research --- Finance and Financial Sector Development --- Financial Intermediation --- Growth rates --- Income growth --- Inequality --- Levels of investments --- Macroeconomics and Economic Growth --- National income --- Poverty Reduction --- Public expenditure --- Trade openness

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This paper addresses the mechanisms by which trade openness affects growth volatility. Using a diverse set of export diversification indicators, it presents strong evidence pointing to an important role for export diversification in reducing the effect of trade openness on growth volatility. The authors also identify positive thresholds for product diversification at which the effect of openness on volatility changes sign. The effect is shown to be positive only for a minority of countries with highly concentrated export baskets. This result is shown to be robust to both explicit accounting for endogeneity as well as the inclusion of a host of additional controls.

Achieving Shared Growth --- Developing countries --- Economic activity --- Economic Conditions and Volatility --- Economic crisis --- Economic development --- Economic growth --- Economic management --- Emerging Markets --- External shocks --- Financial markets --- Fluctuations --- Free Trade --- Growth effect --- Growth effects --- Growth process --- Growth rates --- Growth volatility --- Interest rates --- International Economics and Trade --- International trade --- Liberalization --- Macroeconomic volatility --- Macroeconomics and Economic Growth --- Markets and Market Access --- Poverty Reduction --- Private Sector Development --- Structural characteristics --- Trade openness

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The authors examine empirically how domestic structural characteristics related to openness and product- and factor-market flexibility influence the impact that terms-of-trade shocks can have on aggregate output. For this purpose, they apply an econometric methodology based on semi-structural vector auto-regressions to a panel of 90 countries with annual observations for the period 1974-2000. Using this methodology, the authors isolate and standardize the shocks, estimate their impact on GDP, and examine how this impact depends on the domestic conditions outlined above. They find that larger trade openness magnifies the output impact of external shocks, particularly the negative ones, while improvements in labor market flexibility and financial openness reduce their impact. Domestic financial depth has a more nuanced role in stabilizing the economy. It helps reduce the impact of external shocks particularly in environments of high exposure-that is, when trade and financial openness are high, firm entry is unrestricted, and labor markets are rigid.

Aggregate Output --- Business Cycle --- Currencies and Exchange Rates --- Debt Markets --- Developing Countries --- Economic Conditions and Volatility --- Economic Fluctuations --- Economic Growth --- Economic Theory and Research --- Emerging Markets --- Exchange Rate --- External Shocks --- Finance and Financial Sector Development --- Financial Depth --- Foreign Exchange --- Free Trade --- Growth --- Inequality --- International Economics & Trade --- Labor Market --- Labor Markets --- Macroeconomic Management --- Macroeconomic Policy --- Macroeconomic Stability --- Macroeconomics and Economic Growth --- Output Volatility --- Policy Research --- Poverty Reduction --- Private Sector Development --- Pro-Poor Growth --- Relative Importance --- Significant Impact --- Social Protections and Labor --- Structural Characteristics --- Trade Openness --- Trade Shocks