EXPORT INSTABILITY AND THE ECONOMIC-PERFORMANCE OF DEVELOPING-COUNTRIES

This paper explores the economic consequences of export instability by developing a stochastic optimal control model that is based on the maximizing behavior of a risk-averse representative agent. The model offers an analytical framework that can predict the consequences of export instability for the intertemporal choices of consumption, saving, and investment. The model's results are then used to interpret the large existing body of empirical findings on the relation between export instability and savings, investment, and output growth rates. © 1991.