Download or read book Terms of Trade Shocks and Economic Recovery written by Norbert Funke and published by International Monetary Fund. This book was released on 2008 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Terms of Trade Shocks and the Current Account written by Mr.Paul Cashin and published by International Monetary Fund. This book was released on 1998-12-01 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book The Terms of Trade and Economic Fluctuations written by Mr.Enrique G. Mendoza and published by International Monetary Fund. This book was released on 1992-11-01 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Terms of Trade Shocks are Not all Alike written by Federico Di Pace and published by INTERNATIONAL MONETARY FUND. This book was released on 2020-12-11 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Transitory Terms of trade Shocks and the Current Account written by Maurice Obstfeld and published by . This book was released on 1982 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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,
Download or read book Terms of Trade Shocks and the Current Account written by Paul Anthony Cashin and published by . This book was released on 2006 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Commodity Terms of Trade written by Bertrand Gruss and published by International Monetary Fund. This book was released on 2019-01-24 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Terms of Trade Shocks and Economic Performance 1870 1940 written by Yael S. Hadass and published by . This book was released on 2001 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Policy Applications To Terms Of Trade Shocks written by Benedict Ezema and published by LAP Lambert Academic Publishing. This book was released on 2012-06 with total page 136 pages. Available in PDF, EPUB and Kindle. Book excerpt: The terms of trade shocks have an especially marked impact on the economies of developing countries. But African countries have not responded appropriately to these shocks, hence this study was carried out to compare the impacts of the application of policy adjustments to terms of trade shocks and to assess the extent to which these countries respond to the shocks. The study decomposed and estimated critical performance measures of the economic impacts of these adjustments to terms of trade shocks in these countries for the period 1970-2009 into quantifiable economic indicators namely: changes in import intensity, economic compression, export promotion and external debts. The findings of the study confirms that adverse terms of trade shocks are not only high in Africa but that policy indicators refuse to adjust appropriately in the face of steep fall in export prices. The study, therefore, advocates that African countries should, henceforth, take practical steps to ameliorate the adverse effects of terms of trade shocks by carefully selecting and engaging policy thrusts that suit their particular economic problems and environments.
Download or read book Terms of Trade Shocks written by Jarkko P. Jääskelä and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book The Impact of Terms of Trade Shocks on a Small Open Economy written by Stephen J. Turnovsky and published by . This book was released on 1991 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Not All Terms of Trade Shocks are Alike written by Luciana Juvenal and published by . This book was released on 2020 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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 prices using commodity and manufacturing price data matched with trade shares and separately identify export price, import price and global demand shocks using sign and narrative restrictions. Our findings indicate that, taken together, export and import price shocks account for around 40 percent of output fluctuations. We also find that global demand shocks, which simultaneously affect export and import prices, are often undetected in the terms of trade measure despite having a large effect on business cycles.
Download or read book Terms of Trade Shocks and the Current Account written by Paul Cashin and published by . This book was released on 1999 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Terms of Trade Shocks written by Jarkko Jääskelä and published by . This book was released on 2011 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper 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 paper 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.
Download or read book The Impact of the Terms of Trade on Economic Development in the Periphery 1870 1939 written by Christopher Blattman and published by . This book was released on 2005 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Most countries in the periphery specialized in the export of just a handful of primary products for most of their history. Some of these commodities have been more volatile than others, and those with more volatile prices have grown slowly relative both to the industrial leaders and to other primary product exporters. This fact helps explain the growth puzzle noted by Easterly, Kremer, Pritchett and Summers more than a decade ago: that the contending fundamental determinants of growth institutions, geography and culture exhibit far more persistence than do the growth rates they are supposed to explain. Using a new panel database for 35 countries, this paper estimates the impact of terms of trade volatility and secular change on country performance between 1870 and 1939. Volatility was much more important for accumulation and growth than was secular change. Additionally, both effects were asymmetric between Core and Periphery, findings that speak directly to the terms of trade debates that have raged since Prebisch and Singer wrote more than 50 years ago. The paper also investigates one channel of impact, and finds that foreign capital inflows declined steeply where commodity prices were volatile"--NBER website
Download or read book How Important Are Terms Of Trade Shocks written by Stephanie Schmitt-Grohé and published by . This book was released on 2015 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: According to conventional wisdom, terms of trade shocks represent a major source of business cycles in emerging and poor countries. This view is largely based on the analysis of calibrated business-cycle models. We argue that the view that emerges from empirical SVAR models is strikingly different. We estimate country-specific SVARs using data from 38 poor and emerging countries and find that terms-of-trade shocks explain only 10 percent of movements in aggregate activity. We then build a fully-fledged, open economy model with three sectors, importables, exportables, and nontradables, and use data from each of the 38 countries to obtain country-specific estimates of key structural parameters, including those defining the terms-of-trade process. In the estimated theoretical business-cycle models terms-of-trade shocks explain on average 30 percent of the variance of key macroeconomic indicators, three times as much as in SVAR models.
Download or read book Terms of Trade Shocks and Incomplete Information written by Daniel Rees and published by . This book was released on 2013 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The terms of trade are subject to both permanent and transitory shocks. Particularly for commodity-producing small open economies, it is sometimes argued that the inability of agents to determine which of these shocks are permanent and which are transitory leads to more macroeconomic volatility than would be the case if agents had perfect information about the persistence of these shocks. I set up a small open economy model in which agents have imperfect information about the persistence of terms of trade shocks and estimate the parameters of the model using Australian data. The results point to the existence of large informational frictions. In fact, agents' beliefs about the future path of the terms of trade following transitory and permanent shocks are almost identical. However, the results also suggest that incomplete information causes agents to respond more cautiously to terms of trade shocks. Consequently, consumption, output and the trade balance are less volatile under incomplete information than they are under full information."--Abstract.