This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Long-term Patterns in Australia's Terms of Trade

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Christian Gillitzer (Reserve Bank of Australia)
Jonathan Kearns (Reserve Bank of Australia)

Additional information is available for the following registered author(s):

Abstract

We examine two important aspects of Australia’s terms of trade using 135 years of annual data up to 2003/04. Since Australia predominantly exports commodities and imports manufactures, the Prebisch-Singer hypothesis suggests that there should be a negative trend in the terms of trade. But the trend is no more than -0.1 per cent per annum, less than the trend decline in world commodity prices relative to manufactured goods prices. The weaker trend appears to be the result of Australia exporting, and importantly diversifying toward, commodities with faster price growth. Extending the sample using projections for the terms of trade for the two years to 2005/06 based on commodity price movements to date, the apparent downward trend disappears. Indeed, based on these projections, the terms of trade will have increased by around 50 per cent over the period 1987–2006, unwinding the decline over the preceding 30 years. We also investigate the volatility of the terms of trade and demonstrate that it was significantly higher between 1923 and 1952. This is attributable to substantially higher volatility in the export prices of a few key commodity exports. Volatility declined after 1952 due to smaller shocks to the prices of these goods. The diversification in Australia’s export base since then means that the terms of trade are less susceptible to shocks to prices of individual commodity exports.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.rba.gov.au/rdp/RDP2005-01.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp2005-01.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Apr 2005
Date of revision:
Handle: RePEc:rba:rbardp:rdp2005-01

Contact details of provider:
Postal: GPO Box 3947, Sydney NSW 2001
Phone: 61-2-9551-8111
Fax: 61-2-9551-8000
Email:
Web page: http://www.rba.gov.au/
More information through EDIRC

Order Information:
Web: http://www.rba.gov.au/PublicationsAndResearch/RDP/RDP_Order/index.html

For technical questions regarding this item, or to correct its listing, contact: (Paula Drew).

Related research
Keywords: terms of trade; commodity prices; Prebisch-Singer;

Other versions of this item:

Find related papers by JEL classification:
E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth
E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
F10 - International Economics - - Trade - - - General

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. John T. Cuddington & Hong Liang, 1998. "Commodity Price Volatility Across Exchange Rate Regimes," International Finance 9802003, EconWPA, revised 11 May 1998. [Downloadable!]
  2. Sapsford, David, 1990. "Primary Commodity Prices and the Terms of Trade," The Economic Record, The Economic Society of Australia, vol. 66(195), pages 342-56, December.
  3. Lutz, Matthias G, 1999. "A General Test of the Prebisch-Singer Hypothesis," Review of Development Economics, Blackwell Publishing, vol. 3(1), pages 44-57, February. [Downloadable!] (restricted)
  4. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July. [Downloadable!] (restricted)
    Other versions:
  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, Oxford University Press, vol. 2(1), pages 1-47, January.
  6. Andrews, Donald W K, 1993. "Exactly Median-Unbiased Estimation of First Order Autoregressive/Unit Root Models," Econometrica, Econometric Society, vol. 61(1), pages 139-65, January. [Downloadable!] (restricted)
  7. Cuddington, John T. & Ludema, Rodney & Jayasuriya, Shamila A, 2002. "Prebisch-Singer Redux," Working Papers 15857, United States International Trade Commission, Office of Economics. [Downloadable!]
  8. repec:rus:hseeco:123563 is not listed on IDEAS
  9. A. Protopapadakis, Aris & R. Stoll, Hans, 1986. "The Law of One Price in international commodity markets: A reformulation and some formal tests," Journal of International Money and Finance, Elsevier, vol. 5(3), pages 335-360, September. [Downloadable!] (restricted)
  10. John T. Cuddington & Rodney Ludema & Shamila A Jayasuriya, 2002. "Prebisch-Singer Redux," Working Papers Central Bank of Chile 140, Central Bank of Chile. [Downloadable!]
  11. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22. [Downloadable!]
    Other versions:
  12. Shaghil Ahmed & Andrew Levin & Beth Anne Wilson, 2002. "Recent U.S. macroeconomic stability: good policies, good practices or good luck?," International Finance Discussion Papers 730, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  13. Christopher J. Kent & Paul Cashin, 2003. "The Response of the Current Account to Terms of Trade Shocks: Persistence Matters," IMF Working Papers 03/143, International Monetary Fund. [Downloadable!]
  14. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    Other versions:
  15. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alan Bollard & Mark Smith, 2006. "Major global developments in the new millennium," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 69, pages 14p., June. [Downloadable!]
Statistics
Access and download statistics

Did you know? You can create your own reading lists on IDEAS.

This page was last updated on 2009-11-9.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.