Professor Miguel León-Ledesma has collaborated with Laura Puzzello and Adina Ardelean, in this VoxEU column on the complex interaction between sectoral shocks, sectoral specialisation, and geographic diversification in trade and volatility.
‘This column uses a multi-country, multi-sector framework to study the main sources of risk for open economies and how trade determines the exposure to those risks through specialisation and diversification of sales. It shows that diversification reduces volatility, particularly in countries with higher output volatility. Furthermore, by increasing the co-movement between sectors, lower specialisation increases total risks, counter to conventional wisdom on this relationship.’
Read the full piece here.