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Can globalisation stop the decline in commodities' terms of trade?

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  • André Varella Mollick
  • Jo�o Ricardo Faria
  • Pedro H. Albuquerque
  • Miguel A. León-Ledesma

Abstract

In this paper we address the following question: would a fully integrated world economy eliminate the widely reported decline in the terms of trade of primary commodities? We address the question by looking at the terms of trade within the US (a highly integrated economy). Our findings show two results. First, US internal real commodities' terms of trade over the 1947--1998 period experienced slowly declining but significant trends. Second, once we control for the effect of US prices on international terms of trade, we find a long-run relationship between the US and international relative prices. These findings support the view that the decline of commodities' terms of trade bears no relationship with the process of globalisation. This seems to indicate that, if world terms of trade behaved as the US terms of trade, neither increased integration nor protectionist measures would eliminate this trend. Copyright The Author 2008. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Cambridge Journal of Economics.

Volume (Year): 32 (2008)
Issue (Month): 5 (September)
Pages: 683-701

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Handle: RePEc:oup:cambje:v:32:y:2008:i:5:p:683-701

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Cited by:
  1. Byrne, Joseph P. & Fazio, Giorgio & Fiess, Norbert, 2013. "Primary commodity prices: Co-movements, common factors and fundamentals," Journal of Development Economics, Elsevier, vol. 101(C), pages 16-26.
  2. Araujo, Ricardo, 2013. "Assessing the Dynamics of Terms of Trade in a Model of Cumulative Causation and Structural Change," MPRA Paper 46049, University Library of Munich, Germany.

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