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Author: Norbert Funke
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 30
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Book Description
This paper identifies factors that contribute to a fast recovery in growth after persistent negative terms of trade shocks, using a sample of 159 countries for 1970-2006. The results suggest that policies matter. Fast recoveries are fairly robustly related to real exchange rate depreciation and improvements in government stability and the institutional environment. A timely increase in aid may also support recovery.
Author: Norbert Funke
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 30
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Book Description
This paper identifies factors that contribute to a fast recovery in growth after persistent negative terms of trade shocks, using a sample of 159 countries for 1970-2006. The results suggest that policies matter. Fast recoveries are fairly robustly related to real exchange rate depreciation and improvements in government stability and the institutional environment. A timely increase in aid may also support recovery.
Author: Mr.Paul Cashin
Publisher: International Monetary Fund
ISBN: 145197504X
Category : Business & Economics
Languages : en
Pages : 41
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Book Description
This paper examines the relationship between terms of trade shocks, private saving, and the current account position. The relationship between these variables is theoretically ambiguous: an adverse transitory terms of trade shock can either induce a deterioration or an improvement in the current account, depending on whether the resulting income effects are greater or less than the resulting substitution effects. The substitution effects involve both intertemporally substituting consumption and intratemporally substituting consumption between importables and nontradables. The relative strength of these substitution effects is estimated using data for five OECD countries during 1970/95; both are found to exert large and significant effects on the current account balance.
Author: Mr.Enrique G. Mendoza
Publisher: International Monetary Fund
ISBN: 1451852061
Category : Business & Economics
Languages : en
Pages : 61
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Book Description
A three-good, stochastic intertemporal equilibrium model of a small open economy is used to examine the link between terms of trade and business cycles. Equilibrium co-movements of model economies representing industrial and developing countries are computed and compared with the stylized facts of 30 countries. The results show that terms-of-trade shocks account for half of observed output variability and that the model mimics the Harberger-Laursen-Metzler effect and produces large deviations from purchasing power parity. The elasticity of substitution between tradable and nontradable goods and the persistence of the shocks play a key role in producing these results.
Author: Federico Di Pace
Publisher: INTERNATIONAL MONETARY FUND
ISBN: 9781513563916
Category : Business & Economics
Languages : en
Pages : 61
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Book Description
When analyzing terms-of-trade shocks, it is implicitly assumed that the economy responds symmetrically to changes in export and import prices. Using a sample of developing countries our paper shows that this is not the case. We construct export and import price indices using commodity and manufacturing price data matched with trade shares and separately identify export price, import price, and global economic activity shocks using sign and narrative restrictions. Taken together, export and import price shocks account for around 40 percent of output fluctuations but export price shocks are, on average, twice as important as import price shocks for domestic business cycles.
Author: Maurice Obstfeld
Publisher:
ISBN:
Category : Econometrics
Languages : en
Pages : 34
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Book Description
The paper uses an intertemporal perfect-foresight optimizing model to analyze the effect of transitory terms-of-trade shocks on a small open . economy's current-account and utility time profiles. An adverse terms-of-trade shift known to be temporary induces the economy to run down its stock of external assets in the period before the terms of trade revert to their initial level. Subsequently, the assets consumed during this period are reaccumulated. The current-account response is due only in part to a desire to smooth out the future consumption stream. In addition, households know that the real value of any debt incurred while the terms of trade are unfavorable will be reduced sharply when the terms of trade improve. This opportunity for intertemporal price speculation causes the time path of instantaneous utility to be discontinuous,
Author: Paul Anthony Cashin
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Book Description
This paper examines the relationship between terms of trade shocks, private saving, and the current account position. The relationship between these variables is theoretically ambiguous: an adverse transitory terms of trade shock can either induce a deterioration or an improvement in the current account, depending on whether the resulting income effects are greater or less than the resulting substitution effects. The substitution effects involve both intertemporally substituting consumption and intratemporally substituting consumption between importables and nontradables. The relative strength of these substitution effects is estimated using data for five OECD countries during 1970/95; both are found to exert large and significant effects on the current account balance.
Author: Bertrand Gruss
Publisher: International Monetary Fund
ISBN: 1484393856
Category : Business & Economics
Languages : en
Pages : 38
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Book Description
This paper presents a comprehensive database of country-specific commodity price indices for 182 economies covering the period 1962-2018. For each country, the change in the international price of up to 45 individual commodities is weighted using commodity-level trade data. The database includes a commodity terms-of-trade index—which proxies the windfall gains and losses of income associated with changes in world prices—as well as additional country-specific series, including commodity export and import price indices. We provide indices that are constructed using, alternatively, fixed weights (based on average trade flows over several decades) and time-varying weights (which can account for time variation in the mix of commodities traded and the overall importance of commodities in economic activity). The paper also discusses the dynamics of commodity terms of trade across country groups and their influence on key macroeconomic aggregates.
Author: Yael S. Hadass
Publisher:
ISBN:
Category : Dependency
Languages : en
Pages : 44
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Book Description
Abstract: Debate over trends in the terms of trade between primary commodities and manufactures, their causes and their impact has dominated the literature for more than a century. Classical economists claimed that the terms of trade of primary commodities should improve since land and natural resources are always in inelastic supply. Following the Great Depression, a new view emerged. What came to be known as the Prebisch-Singer thesis was instead that the terms of trade for primary products had deteriorated up to the 1950s. The subsequent literature has almost exclusively and obsessively asked whether a deterioration has actually taken place over the 130 years following 1870. Nowhere in this literature has the impact of these terms of trade shocks on long run growth been assessed, although it is certainly full of lively speculation and debate. This paper fills part of this empirical gap by constructing a country-specific panel data base 1870-1940, by documenting terms of trade trends by country and region, and, finally, by estimating the impact of the price shocks on long run economic performance. We find the impact to have been asymmetric between center and periphery.
Author: Jarkko P. Jääskelä
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This article describes and quantifies the macroeconomic effects of different types of terms of trade shocks and their propagation in the Australian economy. Three types of shocks are identified based on their impact on commodity prices, global manufactured prices and global economic activity. The first two shocks, a world demand shock and a commodity-market-specific shock, are fairly standard. The third shock, a globalisation shock that may result, for instance, from the increasing importance of China, India and eastern Europe in the global economy, is more novel. The globalisation shock is associated with a decline in manufactured prices, a rise in commodity prices and an increase in global economic activity. Determining the underlying source of variation in the terms of trade is shown to be important for understanding the impact on the Australian economy as all three shocks propagate through the economy in different ways. The relative contribution of each shock to inflation, output, interest rates and the exchange rate has also varied over time. The main conclusion of the article is that a higher terms of trade tends to be expansionary but is not always inflationary. A key result is that the floating exchange rate has provided an important buffer to the external shocks that move the terms of trade.
Author: Stephen J. Turnovsky
Publisher:
ISBN:
Category : Terms of trade
Languages : en
Pages : 46
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Book Description
This paper investigates the impact of change in the terms of trade on the economic performance of a small economy. Both the effects of unanticipated shocks and changes in the mean and variance of the probability distribution generating these disturbances are discussed. In all cases, the key element determining the response of the economy is the effect on the rate of growth of real wealth, to which all other real quantities are directly tied in equilibrium. Conditions for the Harberger-Laursen-Metzler effect to hold are discussed. The impact of these changes on economic welfare, as measured by expected discounted utility of the representative agent is also addressed.
