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Terms of Trade Shocks and Economic Recovery

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Author Info

  • Patrick A. Imam
  • Eleonara Granziera
  • Norbert Funke

Abstract

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.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/36.

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Length: 74
Date of creation: 01 Feb 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/36

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Related research

Keywords: Terms of trade; Exchange rate depreciation; Economic growth;

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References

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  1. Valerie Cerra & Sweta Chaman Saxena, 2007. "Growth dynamics: the myth of economic recovery," BIS Working Papers 226, Bank for International Settlements.
  2. Bond, Stephen Roy & Hoeffler, Anke & Temple, Jonathan, 2001. "GMM Estimation of Empirical Growth Models," CEPR Discussion Papers 3048, C.E.P.R. Discussion Papers.
  3. Pritchett, Lant, 2000. "Understanding Patterns of Economic Growth: Searching for Hills among Plateaus, Mountains, and Plains," World Bank Economic Review, World Bank Group, vol. 14(2), pages 221-50, May.
  4. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers.
  5. Grilli, Enzo R & Yang, Maw Cheng, 1988. "Primary Commodity Prices, Manufactured Goods Prices, and the Terms of Trade of Developing Countries: What the Long Run Shows," World Bank Economic Review, World Bank Group, vol. 2(1), pages 1-47, January.
  6. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  7. Stephen Bond & Anke Hoeffler, 2001. "GMM Estimation of Empirical Growth Models," Economics Series Working Papers 2001-W21, University of Oxford, Department of Economics.
  8. Jerzmanowski, Michal, 2006. "Empirics of hills, plateaus, mountains and plains: A Markov-switching approach to growth," Journal of Development Economics, Elsevier, vol. 81(2), pages 357-385, December.
  9. Marianne Baxter & Michael A. Kouparitsas, 2000. "What Causes Fluctuations in the Terms of Trade?," NBER Working Papers 7462, National Bureau of Economic Research, Inc.
  10. Mendoza, Enrique G., 1997. "Terms-of-trade uncertainty and economic growth," Journal of Development Economics, Elsevier, vol. 54(2), pages 323-356, December.
  11. Broda, Christian, 2004. "Terms of trade and exchange rate regimes in developing countries," Journal of International Economics, Elsevier, vol. 63(1), pages 31-58, May.
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Citations

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Cited by:
  1. Antonio David & Fabiano Rodrigues Bastos & Marshall Mills, 2011. "Post-conflict Recovery: Institutions, Aid, or Luck?," IMF Working Papers 11/149, International Monetary Fund.
  2. Camelia Minoiu & Patrick A. Imam, 2008. "Mauritius: A Competitiveness Assessment," IMF Working Papers 08/212, International Monetary Fund.
  3. Fofack, Hippolyte, 2009. "Africa and Arab Gulf states : divergent development paths and prospects for convergence," Policy Research Working Paper Series 5025, The World Bank.
  4. Souleymane DIARRA, 2012. "Effets des Chocs de Produits de Base sur la Mobilisation des Recettes Publiques dans les Pays d'Afrique Sub-saharienne," Working Papers halshs-00658482, HAL.
  5. Lee Robinson & Alice Nicole Sindzingre, 2012. "China’s Ambiguous Impacts on Commodity-Dependent Countries: the Example of Sub-Saharan Africa (with a Focus on Zambia)," EconomiX Working Papers 2012-39, University of Paris West - Nanterre la Défense, EconomiX.
  6. Patrick A. Imam, 2008. "Rapid Current Account Adjustments: Are Microstates Different?," IMF Working Papers 08/233, International Monetary Fund.
  7. BARBALAU, Adelina Georgiana, 2012. "Inflation targeting: dead or alive?," Romanian Distribution Committee Magazine, Romanian Distribution Committee, vol. 3(3), pages 41-49, 09.

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