Economic complexity (ECI) and output volatility: A panel data analysis.

Abstract

This paper aims to investigate the relationship between economic complexity and output volatility. We analyze whether Economic Complexity Index (ECI) ratings affect macroeconomic volatility. Given that the ECI aims to measure productive knowledge, we expect to see that countries with a higher ECI score are more resilient to economic shocks and, hence, have lower volatility. We estimate a fixed effects model for a series of 84 countries for the period between 1995 and 2018. The results indicate an ambiguous relationship between ECI and output volatility.