Trade can act as a mechanism to transmit a country-specific shock from one country to others. Since many low-income countries’ exports are concentrated in a narrow range of commodities, shocks to trade often translate into significant volatility in overall output. Such trade shocks can also cause prolonged recessions by leading to a decline in investment associated with the traded sectors of the economy. Although there are long-term benefits for macroeconomic stability through trade, as noted above, the vulnerability created by such shocks is an important challenge for developing countries and emphasizes the benefits to poor countries of diversifying their exports, in terms of both products and markets.