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Can Globalisation Stop the Decline in Commodities' Terms of Trade?

Author

Listed:
  • André Varella Mollick

    (CoBA - College of Business Administration - University of Texas-Pan American)

  • João Ricardo Faria

    (MPA - Master in Public Administration - UTEP - University of Texas [El Paso])

  • Pedro Albuquerque

    (Euromed Marseille - École de management - Association Euromed Management - Marseille, DEFI - Centre de recherche en développement économique et finance internationale - GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Miguel A. León-Ledesma

    (School of Economics - University of Kent [Canterbury])

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.

Suggested Citation

  • André Varella Mollick & João Ricardo Faria & Pedro Albuquerque & Miguel A. León-Ledesma, 2008. "Can Globalisation Stop the Decline in Commodities' Terms of Trade?," Post-Print halshs-00746269, HAL.
    • Handle: RePEc:hal:journl:halshs-00746269
    DOI: 10.1093/cje/bem054
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    Cited by:

    1. André Varella Mollick & João Ricardo Faria & Pedro H. Albuquerque & Miguel A. León-Ledesma, 2008. "Can globalisation stop the decline in commodities' terms of trade?," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 32(5), pages 683-701, September.
    2. Trofimov, Ivan D., 2018. "Income terms of trade and economic convergence: Evidence from Latin America," MPRA Paper 87598, University Library of Munich, Germany.
    3. 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.
    4. André Varella Mollick & João Ricardo Faria & Pedro H. Albuquerque & Miguel A. León-Ledesma, 2008. "Can globalisation stop the decline in commodities' terms of trade?," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 32(5), pages 683-701, September.
    5. Débora Machado Nunes, 2024. "Imperialism in the Financial Capital Era: Forgotten Contributions from Marxist Dependency Theory," Review of Radical Political Economics, Union for Radical Political Economics, vol. 56(1), pages 5-22, March.
    6. Leon Podkaminer, 2016. "Has trade been driving global economic growth?," NBP Working Papers 251, Narodowy Bank Polski.
    7. Thomas H.W. Ziesemer, 2014. "Country terms of trade: trends, unit roots, over-differencing, endogeneity, time dummies, and heterogeneity," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(6), pages 767-796, September.
    8. Ricardo Azevedo Araujo, 2016. "Assessing the dynamics of terms of trade inamodelof cumulative causation andstructural change," Brazilian Journal of Political Economy, Center of Political Economy, vol. 36(1), pages 150-167.
    9. Byrne, Joseph P & Fazio, Giorgio & Fiess, Norbert, 2010. "Optimism and commitment: An elementary theory of bargaining and war," SIRE Discussion Papers 2010-102, Scottish Institute for Research in Economics (SIRE).
    10. Leon Podkaminer, 2019. "The decline in investment shares is not caused by falling relative prices of capital: a note," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(2), pages 369-380, May.
    11. Leon Podkaminer, 2014. "Does trade drive global output growth?," Bank i Kredyt, Narodowy Bank Polski, vol. 45(4), pages 311-330.
    12. Leon Podkaminer, 2021. "Does trade support global output growth? Further evidence on the global trade – global output connection," Bank i Kredyt, Narodowy Bank Polski, vol. 52(1), pages 23-36.

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    More about this item

    Keywords

    Economic integration; Globalisation; Prebisch-Singer;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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