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After investment, exports and imports are the most volatile components of aggregate demand within countries. Moreover, the volatility of growth and the volatility of trade flows tend to move together; they declined from the 1990s until 2009, followed by an increase since 2009. This paper explores the drivers of such movements in trade-flow volatility. The analysis decomposes trade growth into six components to study their contribution to the overall volatility of trade flows, and presents three findings. First, trade volatility is mostly explained by a factor common to all countries, country-specific factors, and changes in the gravity-related characteristics of a country's trading partners. Product composition and the identity of trading partners appear to be less important in explaining volatility. Second, the pre-2009 decline in volatility and the post-2009 increase in volatility appear to be driven by different factors. The former is mostly explained by a steady decline in the variance of country-specific factors. In contrast, the latter appears to be driven mainly by an increase in the volatility of factors common to all countries. Third, trade diversification is a likely force behind the steady decline in trade volatility driven by country-specific factors, especially in developing countries.

Economic Development --- Trade Liberalization --- Volatility

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This paper adds to aid volatility literature in three ways: First it tests the validity of the aid volatility and growth relationship from various aspects: across different time horizons, by sources of aid, and by aid volatility interactions with country characteristics. Second, it investigates the relationship by the level of aid absorption and spending. Third, when examining the relationship between International Development Association aid volatility and growth, it isolates International Development Association aid volatility due to the recipient country's performance from that due to other sources. The findings suggest that, in the long run, on average, aid volatility is negatively correlated with real economic growth. But the relationship is not even. It is stronger for Sub-Saharan African countries than for other regions and it is not present in middle-income countries or countries with strong institutions. For economies where aid is fully absorbed, aid volatility matters for long-run growth; economies with full aid spending also bear a negative impact of aid volatility on long-run growth. Where aid is not fully absorbed, or where it is not fully spent, the aid volatility relationship is not significant. Looking at International Development Association aid separately, the volatility arising from the recipient country's International Development Association performance does not have a causal relationship with growth. In policy terms, the results suggest that low- income countries with weak institutions, especially in Sub-Saharan Africa, could benefit from reduced aid volatility or from being better prepared for the volatility that is there.

Achieving Shared Growth --- Average growth rate --- Development Economics & Aid Effectiveness --- Economic Conditions and Volatility --- Economic growth --- Emerging Markets --- Exogenous volatility --- Fiscal policy --- Fluctuations --- Gender --- Gender and Health --- Growth --- Growth relationship --- Income --- Long-run growth --- Low income --- Low income countries --- Low-income countries --- Macroeconomic shocks --- Macroeconomics and Economic Growth --- Middle-income countries --- Poverty --- Poverty Reduction --- Private Sector Development --- Standard errors --- Volatility --- Volatility literature --- Volatility measure --- Volatility-growth

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This paper studies how firm-level export performance is affected by Real Exchange Rate (RER) volatility and investigates whether this effect depends on existing financial constraints. The empirical analysis relies on export data for more than 100,000 Chinese exporters over the 2000-6 period. The results confirm a trade-deterring effect of RER volatility. Firms' decision to begin exporting and the exported value decrease for destinations with higher exchange rate volatility; besides, this effect is magnified for financially vulnerable firms. As expected, financial development seems to dampen this negative impact, especially on the intensive margin of export. These results provide micro-founded evidence suggesting that the existence of well-developed financial markets allows firms to hedge exchange rate risk. The results also support a key role of financial constraints in determining the macro impact of RER volatility on real outcomes.

Currencies and Exchange Rates --- Debt Markets --- Economic Conditions and Volatility --- Emerging Markets --- Exchange Rate Volatility --- Exports --- Financial Development --- Fiscal & Monetary Policy --- Macroeconomics and Economic Growth

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Do sources of volatility differ by country characteristics such as the level of development, country size, quality of institutions, and presence of restrictions on fiscal policy? This paper sets out to answer this question in a quarterly panel of 48 developed and developing countries for 1960-2015. Using individual country and panel vector autoregressions, the paper shows that factors affecting gross domestic product volatility differ systematically by country size, development level, and whether a country has adopted fiscal rule(s). The role of country size is particularly pronounced in developing countries. The paper shows that small developing countries are more prone to domestic output shocks, while shocks to the world interest rate and real exchange rate are more important in large developing countries. Small countries are also more susceptible to terms of trade shocks. These results suggest that stabilization policies must be designed with these country characteristics in mind.

Business Cycles --- Economic Conditions and Volatility --- Economic Shocks --- Exchange Rates --- Interest Rate --- Macroeconomics and Economic Growth --- Small States --- Terms of Trade --- Volatility

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The information contained in news articles plays a key role on
financial markets. It may describe changes in the fundamentals of a company
or influence the way investors perceive the risk associated with it. This paper
aims at measuring with mathematical means the main underlying semantic
content of news articles, such that it captures information useful to forecast
volatility.

A modified EGARCH model with external factors, obtained from a latent semantic alaysis on news articles, is proposed to measure the impact on volatility induced by the latent semantic content of the textual news data. I find that several semantic dimensions play an important
role in explaining observed volatility, while others are useful to forecast it. It
is likely, that with further research, a model based on semantic content could
greatly improve our understanding of the market’s response to news releases.

LSA --- GARCH --- EGARCH --- GARCH-X --- Latent Semantic Analysis --- Volatility Forecasting --- S&P500 --- Lagged corredlations --- Reuters --- News --- News Articles --- Conditional Volatility --- Sciences économiques & de gestion > Finance