A NEW LOOK AT THE EFFECTS OF EXPORT INSTABILITY ON INVESTMENT AND GROWTH

This paper is concerned with the effects of export instability on inve stment and growth. It is shown that past cross-sectional empirical stu dies on the effects of export instability (either in prices or in valu e terms) used an incorrect measure of instability that does not proper ly take account of the share of exports in GDP. Using a new instabilit y index and a broad set of conditioning variables, it is shown that ex port instability was positively associated with investment but negativ ely associated with growth in a large sample of countries during the p eriod from the early 1970s to the mid 1980s. Copyright (C) 1996 Elsevi er Science Ltd