Commodity concentration and export fluctuations: A probability analysis

This paper examines the argument that diversification of exports can help reduce export fluctuations. Our main point is that the problem of export fluctuations is not uni‐dimensional but has to be defined with reference to some characteristics of the country, e.g. ability to forecast fluctuations, or availability of reserves to meet their effects. Focusing on two aspects of fluctuations—one concerned with the average amplitude and the other with the sporadicity—we show that diversification may help to mitigate the former aspect but may enhance the latter. This suggests that in order to evaluate the effects of diversification we need more information on how countries define their problem of fluctuations.