Export instability and economic structure: An east-west comparison

Abstract

The purpose of this paper was to extend Massell’s model of export instability to the case of the European market and centrally planned economies. Using a common measure of export instability we first saw that the MEs displayed significantly greater export instability than the CPEs. Applying our extension of the Massell model we then found that this difference could be satisfactorily explained by the “other” structural characteristics of the economies involved, and one need not therefore invoke the difference in economic systems. In particular, exports of food and raw materials were each found to be significantly associated with greater export instability, while there was also a strong suggestion that countries with higher GNPC tended to experience, net of the other variables in the system, a greater degree of instability. Finally, a comparison of these results with those obtained by Massell revealed striking contrasts, indicating that very different policy conclusions could be drawn from the results of the two studies.