The trade vulnerability of emerging and developing countries

Economic vulnerability arises when a country is prone to a sudden and prolonged break in its growth pattern (crisis); this needs to be distinguished from the mere notion of economic shock. It is important to ascertain whether some trigger points (such as large account deficits) are merely precursor signs of shocks or whether they announce a crisis. Most countries do indeed experience major shocks -to their terms of trade for example - but not all shocks materialize in a crisis. However, it is important to note that dependence and interdependence do not equate with economic vulnerability. Trade linkages per se do not render the trading countries more vulnerable. It is argued in this section that it is the type of trade structure (or export structure) that makes a country vulnerable rather than its mere openness through trade.

Related Subject(s): International Trade and Finance
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