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| Author | : Nikola Spatafora |
| Publisher | : World Bank Publications |
| Total Pages | : 42 |
| Release | : 1999 |
| Genre | : |
| ISBN | : |
Download Macroeconomic Effects of Terms-of-trade Shocks Book in PDF, ePub and Kindle
January 1995 The authors investigate the impact on economic growth and development of long-run movements in the external terms of trade, with special reference to the experience of 18 oil-exporting countries between 1973 and 1989. They argue that this sample approximates a controlled experiment for examining the impact of unanticipated -- but permanent -- shocks to the terms of trade. They analyze the sample econometrically using panel data techniques. They find that permanent terms-of-trade shocks have a strongly significant positive effect on investment, which they justify theoretically on the grounds that countries in the sample import much of their capital equipment. The shocks also have a significant positive effect on consumption. Government consumption responds almost twice as strongly as private consumption. The shocks have no effect on savings and adversely affect the trade and current account balances. There is a significant positive effect on the output of all main categories of nontradables. But Dutch disease effects are strikingly absent. Agriculture and manufacturing do not contract in reaction to an oil price increase. Dutch disease effects may be absent in part because of policy-induced output restraints in the oil sector, or because of the enclave nature of the oil sector, which does not participate in domestic factor markets.
| Author | : Nicola Spatafora |
| Publisher | : |
| Total Pages | : 42 |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
Download Macroeconomic Effects of Terms-of-Trade Shocks Book in PDF, ePub and Kindle
The authors investigate the impact on economic growth and development of long-run movements in the external terms of trade, with special reference to the experience of 18 oil-exporting countries between 1973 and 1989. They argue that this sample approximates a controlled experiment for examining the impact of unanticipated -- but permanent -- shocks to the terms of trade. They analyze the sample econometrically using panel data techniques. They find that permanent terms-of-trade shocks have a strongly significant positive effect on investment, which they justify theoretically on the grounds that countries in the sample import much of their capital equipment. The shocks also have a significant positive effect on consumption. Government consumption responds almost twice as strongly as private consumption. The shocks have no effect on savings and adversely affect the trade and current account balances. There is a significant positive effect on the output of all main categories of nontradables. But Dutch disease effects are strikingly absent. Agriculture and manufacturing do not contract in reaction to an oil price increase. Dutch disease effects may be absent in part because of policy-induced output restraints in the oil sector, or because of the quot;enclavequot; nature of the oil sector, which does not participate in domestic factor markets.
| Author | : International Monetary Fund |
| Publisher | : International Monetary Fund |
| Total Pages | : 57 |
| Release | : 1999-10-01 |
| Genre | : Business & Economics |
| ISBN | : 1451855583 |
Download Macroeconomic and Sectoral Effects of Terms-of-Trade Shocks Book in PDF, ePub and Kindle
This paper investigates the impact of long-run terms-of-trade shocks. Analytically, we show that, if capital goods are largely importable or the labor supply is sufficiently elastic, then natural-resource booms increase aggregate investment and worsen the current account, but Dutch ‘Disease’ effects are weak. We then examine 18 oil-exporting developing countries during 1965-89. Favorable terms-of-trade shocks increase investment and (especially government) consumption, but reduce medium-term savings; hence, the current account deteriorates. Nontradable output increases, in response to real appreciations, but Dutch Disease effects are strikingly absent. Investment, consumption, and nontradable output respond more to a terms-of-trade decline than to an increase.
| Author | : Mr.Paul Cashin |
| Publisher | : International Monetary Fund |
| Total Pages | : 41 |
| Release | : 1998-12-01 |
| Genre | : Business & Economics |
| ISBN | : 145197504X |
Download Terms of Trade Shocks and the Current Account Book in PDF, ePub and Kindle
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 | : Christopher J. Kent |
| Publisher | : International Monetary Fund |
| Total Pages | : 50 |
| Release | : 2003-07-01 |
| Genre | : Business & Economics |
| ISBN | : 1451856369 |
Download The Response of the Current Account to Terms of Trade Shocks Book in PDF, ePub and Kindle
Is the relationship between the current account balance and the terms of trade affected by the persistence of terms of trade shocks? In intertemporal models of the current account that incorporate a consumption-smoothing and an investment response to shocks, the effect of the terms of trade on external balances is predicted to be dependent on the duration of terms of trade shocks. Using a median-unbiased estimator, an unbiased model-selection rule, and terms of trade data for 128 countries over the period 1960-99 we identify two groups of countries-those that typically experience temporary terms of trade shocks and those that typically experience permanent terms of trade shocks. The results from panel-data regressions of the two groups of countries support the theoretical predictions of the intertemporal approach to the current account. We find that the greater (lesser) the persistence of the terms of trade shock, the more (less) the investment effect dominates the consumption-smoothing effect on saving, so that the current account balance moves in the opposite (same) direction as that of the shock.
| Author | : Mr.Jonathan David Ostry |
| Publisher | : International Monetary Fund |
| Total Pages | : 26 |
| Release | : 1991-10-01 |
| Genre | : Business & Economics |
| ISBN | : 1451852312 |
Download Private Saving and Terms of Trade Shocks Book in PDF, ePub and Kindle
This paper examines the relationship between temporary terms of trade shocks and household saving in developing countries. It is first shown that, from a theoretical standpoint, this relationship is ambiguous: private saving may rise or fall in response to a transitory terms of trade shock, depending on the values of the intertemporal elasticity of substitution and the intratemporal elasticity of substitution between traded and nontraded goods. Empirical estimates of these two parameters are obtained using data from a sample of 13 developing countries, and then used to draw implications for the response of private saving to transitory terms of trade shocks.
| Author | : Norbert Funke |
| Publisher | : International Monetary Fund |
| Total Pages | : 30 |
| Release | : 2008 |
| Genre | : Business & Economics |
| ISBN | : |
Download Terms of Trade Shocks and Economic Recovery Book in PDF, ePub and Kindle
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 | : International Monetary Fund |
| Publisher | : International Monetary Fund |
| Total Pages | : 41 |
| Release | : 2010-10-01 |
| Genre | : Business & Economics |
| ISBN | : 1455210331 |
Download On the Distributive Effects of Terms of Trade Shocks Book in PDF, ePub and Kindle
We introduce non-tradable goods to the Heckscher-Ohlin-Samuelson (HOS) model to study the distributive effects of terms of trade shocks. We show that the employment of resources in activities producing exclusively for the local market induces a crucial association between domestic spending and factor demand and prices, which is absent in the usual HOS framework. Specifically, in a two-sector economy (producing only exportable and non-tradable goods) there are no redistributive effects of external terms of trade shifts-i.e. no Stolper-Samuelson-type of effect. By extending the model to the domestic production of a third, importable good, we show that distributional tensions arise. Distributional conflicts occur within urban labor groups (skilled vs. unskilled) and not only between the "traditional" rural vs. urban factors. Finally, export taxes are imposed to re-distribute the effects of external shocks. We show that the ability of the government to cushion the impact of the terms of trade shift on the economy’s income distribution depends crucially on the use of the tax revenues.
| Author | : International Monetary Fund |
| Publisher | : International Monetary Fund |
| Total Pages | : 29 |
| Release | : 2010-12-01 |
| Genre | : Business & Economics |
| ISBN | : 1455210862 |
Download A Noteon Terms of Trade Shocks and the Wage Gap Book in PDF, ePub and Kindle
Using Chilean data, we document that for resource-rich small open economies the effects of terms of trade shocks on the wage gap (between skilled and unskilled workers) depend on factor intensities in the non-tradable sector, following the model in Galiani, Heymann, and Magud (2010). For a skilled-intensive non-tradable sector we show that improvements in the terms of trade benefit skilled workers. We also show that this relation holds at the industry level: the wage gap widens in skilled-intensive sectors while it shrinks in unskilled-intensive ones, the more so as terms of trade volatility decreases.
| Author | : Jarkko P. Jääskelä |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2013 |
| Genre | : |
| ISBN | : |
Download Terms of Trade Shocks Book in PDF, ePub and Kindle
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.
