Volatility in the primary export sector: an analysis of the Peruvian case

This article examines the relationship between the structure of the primary export sector and the volatility of export prices in the context of the Peruvian economy, where approximately two-thirds of exports consist of primary products. The study is based on annual data from 1962 to 2000 and uses econometrics to assess how product diversification affects price volatility. The results show that not all primary products exhibit the same degree of volatility; for example, copper and gold have lower volatility compared to oil. In addition, the evidence indicates that greater diversification in the export sector helps reduce aggregate price volatility. Macroeconomic factors such as global economic activity and inflation are identified as key determinants of price variation. The policy implications suggest that improving diversification in the primary sector can strengthen the country’s economic stability in the face of external shocks. This contrasts with the traditional view of vulnerability due to dependence on primary products. (Abstract and audio: Department of Economic Publications)