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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: 23
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. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, 06.
  2. Stephen Bond & Anke Hoeffler & Jonathan Temple, 2001. "GMM Estimation of Empirical Growth Models," Economics Papers 2001-W21, Economics Group, Nuffield College, University of Oxford.
  3. William Easterly, 2006. "Reliving the 1950s: the big push, poverty traps, and takeoffs in economic development," Journal of Economic Growth, Springer, vol. 11(4), pages 289-318, December.
  4. 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.
  5. 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.
  6. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, vol. 98(1), pages 439-57, March.
  7. 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.
  8. 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.
  9. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
  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. Marianne Baxter & Michael A. Kouparitsas, 2000. "What Causes Fluctuations in the Terms of Trade?," NBER Working Papers 7462, National Bureau of Economic Research, Inc.
  12. Stephen Bond & Anke Hoeffler, 2001. "GMM Estimation of Empirical Growth Models," Economics Series Working Papers 2001-W21, University of Oxford, Department of Economics.
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Citations

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Cited by:
  1. 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.
  2. Camelia Minoiu & Patrick A. Imam, 2008. "Mauritius: A Competitiveness Assessment," IMF Working Papers 08/212, International Monetary Fund.
  3. 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.
  4. BARBALAU, Adelina Georgiana, 2012. "Inflation targeting: dead or alive?," Romanian Distribution Committee Magazine, Romanian Distribution Committee, vol. 3(3), pages 41-49, 09.
  5. Patrick A. Imam, 2008. "Rapid Current Account Adjustments: Are Microstates Different?," IMF Working Papers 08/233, International Monetary Fund.
  6. Antonio David & Fabiano Rodrigues Bastos & Marshall Mills, 2011. "Post-conflict Recovery: Institutions, Aid, or Luck?," IMF Working Papers 11/149, International Monetary Fund.
  7. Fofack, Hippolyte, 2009. "Africa and Arab Gulf states : divergent development paths and prospects for convergence," Policy Research Working Paper Series 5025, The World Bank.

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