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The Measurement Of Terms Of Trade Effects

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  • Pierre Gutmann

Abstract

The change in goods and services available in a national economy brought about by the shifting of external price relationships is referred to as the terms of trade effects. This paper reviews the various methods which have been devised since the war to define and quantify such effects on the Gross National Product. The statistical annex shows that, as far as OECD countries are concerned, the differences between the various measures are not significant. Whereas the effects from terms of trade represented, on average, less than one half of one percent of the GNP of OECD countries during the 1960's the percentage has increased substantially since 1973, due most importantly to the increase in the oil price; by 1977 (on a 1970 price basis), it had reached 5 percent of GNP in Japan and up to 6 percent in Italy. On the other hand, the extreme case of Saudi Arabia where various formulas generate effects amounting to between one half and the whole of GNP, indicates that the measurement of terms of trade effects by various methods may give different results.

Suggested Citation

  • Pierre Gutmann, 1981. "The Measurement Of Terms Of Trade Effects," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 27(4), pages 433-453, December.
    • Handle: RePEc:bla:revinw:v:27:y:1981:i:4:p:433-453
    DOI: 10.1111/j.1475-4991.1981.tb00247.x
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    Cited by:

    1. Wolfgang Nierhaus, 2021. "Real Value of Gross Domestic Product and Terms of Trade: Results for 2020," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 74(02), pages 55-60, February.
    2. Surajit Deb, 2002. "Terms of Trade in a Multi-Sectoral Framework: Analysis for All-India and States," Working papers 112, Centre for Development Economics, Delhi School of Economics.
    3. Wolfgang Nierhaus, 2014. "Real value of GDP: Purchasing Power Plus Through Terms-of-Trade Profits," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 67(14), pages 27-30, July.
    4. Wolfgang Nierhaus, 2014. "Real Value of Gross Domestic Product: Latest Results," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 67(03), pages 52-55, February.
    5. Wolfgang Nierhaus, 2015. "Real Value of Gross Domestic Product and Terms of Trade: Results for 2014," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 68(03), pages 36-40, February.
    6. Gómez D’Angelo, Walter, 2016. "Términos de intercambio, PIB e Ingreso Interno Real en Bolivia," Revista Latinoamericana de Desarrollo Economico, Carrera de Economía de la Universidad Católica Boliviana (UCB) "San Pablo", issue 26, pages 45-68, November.
    7. Marshall B. Reinsdorf, 2010. "Terms Of Trade Effects: Theory And Measurement," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(s1), pages 177-205, June.
    8. Karshenas M., 1989. "Intersectoral resource flows and development: lessons of past experience," ILO Working Papers 992686643402676, International Labour Organization.
    9. Wolfgang Nierhaus, 2020. "Real Value of Gross Domestic Product and Terms of Trade: Results for 2019," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 73(03), pages 55-57, March.
    10. Wolfgang Nierhaus, 2015. "Terms of Trade und Trading Gain," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 68(09), pages 16-20, May.
    11. repec:ilo:ilowps:268664 is not listed on IDEAS
    12. Ward, Marianne & Devereux, John, 2012. "The Road Not Taken: Pre-Revolutionary Cuban Living Standards in Comparative Perspective," The Journal of Economic History, Cambridge University Press, vol. 72(1), pages 104-132, March.
    13. Wolfgang Nierhaus, 2017. "Real Value of Gross Domestic Product and Terms of Trade: Results for 2016," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 70(03), pages 46-50, February.

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