Impact of export fluctuations on income-a cross country analysis

Abstract

The degree of export fluctuation and its impact on income have been the subject of a number of investigations. A major bone of contention has been whether developing countries experience a greater degree of fluctuation in exports than developed countries and whether such fluctuations affect the growth rate of developing countries. In this paper we address ourselves to the second issue - the im pact of export fluctuations, particularly on the in come of the developing countries. For this purpose we construct comparable econometric models for a number of countries - mostly developing but some developed - and derive from these models the ex port-income multiplier that can throw light on the question of which countries are affected more by export fluctuations. We find that the procedure of using cross country regressions adopted by a num ber of writers for studying this issue is defective. In section I we outline the theoretical model em ployed and develop the method used for bringing out the impact on income of changes in exports. In section II we present the econometric models esti mated and the findings that emerge from them. Section III gives our conclusions.