Ashoka Mody, Alina Carare, 13 May 2010

How has globalisation affected output growth volatility? This column presents findings from 22 OECD countries suggesting that while volatility reached a low in the mid-1990s, it has crept back up due the spillovers from otherwise domestic shocks. This increased sensitivity has been caused by the increased vertical specialisation in global trade. While beneficial for output, vertical specialisation is a double-edged sword.

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