Small developing countries more vulnerable to economic shocks, need tailored stabilization policies.
The study looked at why economies in different countries experience ups and downs. They found that factors causing economic volatility vary depending on the country's size, level of development, and rules about government spending. Small developing countries are more affected by changes in their own production, while larger developing countries are influenced by global interest rates and exchange rates. Small countries are also hit harder by changes in trade terms. This means that policies to stabilize economies need to consider these differences between countries.