Many economists believe that, while openness to trade increases average GDP growth rates, it also raises output volatility by exposing countries to terms-oftrade shocks. This view does not take into account that, as suggested by a recent strand of the financial fragility literature, commercial...

The impact of international trade, or “openness”, on economic growth is difficult to quantify because of reverse causality. In this paper, I use recent advances in gravity equation estima- tion to generate a geography-based instrument for openness a la Frankel and Romer (1999). In contrast...