The Diversified Economy: Possibilities from Modern Portfolio Management
The issue of economic diversification is considered from a portfolio perspective, and the chapter begins by describing a simple mean-variance optimization process for a financial portfolio. Considering an economy to be a portfolio of economic sectors, a brief empirical illustration is provided. This is done to assess the prospect of such an algorithm in providing diversification guidelines for policymakers. For this purpose, quarterly revenue data from June 1991 to June 2016 are used from the energy and non-energy sectors of Trinidad and Tobago. The empirical exercise provides important pointers for the administration, in terms of attention allocation to energy and non-energy sectors in Trinidad and Tobago.
- Callen, T., C. Reda, H. Fuad, H. Amgad, and K. Padamja. Economic Diversification in the GCC: Past, Present, and Future. International Monetary Fund (2014). https://www.imf.org/external/pubs/ft/sdn/2014/sdn1412.pdf.
- Elbadawi, I., and Alan Gelb. Oil, Economic Diversification and Development in the Arab World. Economic Research Forum Policy Research Report 35 (2010).Google Scholar
- Freire, C. “Economic Diversification: Explaining the Pattern of Diversification in the Global Economy and Its Implications for Fostering Diversification in Poorer Countries.” United Nations DESA Working Paper 150 (2017): 1–30.Google Scholar
- Gibson, B. “The Structuralist Growth Model.” In The Handbook of Alternative Theories of Economic Growth, ed. Mark Setterfield. Cheltenham, UK: Edward Elgar Publishing, 2010.Google Scholar
- Hausmann, R., and Baily Klinger. “The Structure of the Product Space and the Evolution of Comparative Advantage.” Center for International Development Working Paper 128 (2006): 1–35.Google Scholar
- Klimek, P., R. Hausmann, and S. Thurner. “Empirical Confirmation of Creative Destruction from World Trade Data.” CID Working Paper 238 (2012): 1–13.Google Scholar
- Markowitz, H. “Portfolio Selection.” The Journal of Finance 7, no. 1 (1952): 77–91.Google Scholar
- Rodrik, D. “Industrial Development: Some Stylized Facts and Policy Directions.” In Industrial Development for the 21st Century: Sustainable Development Perspectives, 7–28. United Nations, NY, 2007.Google Scholar