What Can Account for Fluctuations in the Terms of Trade?
Abstract
This paper studies the sources of terms of trade volatility. We decompose the terms of trade into two components. The 'goods price' component stems from differences in the composition of import and export baskets, while the 'country price' component stems from deviations from the law of one price. Countries are classified according to their major import and export goods: commodities, manufactured goods and fuels. Except fuel exporters, there is roughly equal importance of goods price vs country price volatility. These results suggest that there may be a role for reducing terms of trade volatility through diversification of a country's exports. Copyright 2006 Blackwell Publishing Ltd.(This abstract was borrowed from another version of this item.)
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Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - The Institute for Economic Development Working Papers Series with number dp-112.Length: 27 pages
Date of creation: Dec 2000
Date of revision:
Handle: RePEc:bos:iedwpr:dp-112
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Related research
Keywords: Terms of Trade; International business cycles;Other versions of this item:
- Marianne Baxter & Michael A. Kouparitsas, 2006. "What Can Account for Fluctuations in the Terms of Trade?," International Finance, Wiley Blackwell, vol. 9(1), pages 63-86, 05.
- Marianne Baxter & Michael A. Kouparitsas, 2000. "What can account for fluctuations in the terms of trade?," Working Paper Series WP-00-25, Federal Reserve Bank of Chicago.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-06 (All new papers)
- NEP-BEC-2006-05-06 (Business Economics)
- NEP-INT-2006-05-06 (International Trade)
- NEP-MAC-2006-05-06 (Macroeconomics)
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