The Implications of Trade Barriers for Sectoral Diversification and Macroeconomic Stability in Developing Economies

Author/Editor:

Gabriel Srour

Publication Date:

February 1, 2006

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The paper examines the implications of lower trade barriers for sectoral diversification and macroeconomic stability in developing economies with a large primary goods sector. It shows that lower trade barriers can have ambiguous effects on macroeconomic stability. It shows also that diversification, in the form of equal distribution of resources between nonprimary sectors, may be counterproductive. In fact, investment in the nonprimary sector with lower trade barriers unambiguously enhances macroeconomic stability in a developing economy that is subject to substantial primary shocks.

Series:

Working Paper No. 2006/050

Subject:

Exports Income Real wages Trade barriers Wages

English

Publication Date:

February 1, 2006

ISBN/ISSN:

9781451863109/1018-5941

Stock No:

WPIEA2006050

Pages:

26

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