IDEAS home Printed from
   My bibliography  Save this article

Income Effect, Wealth Effect, and the Terms of Trade with Finite Horizons


  • Arman Mansoorian


The two-sector model is incorporated into Blanchard's OLG framework. The total effect of a terms-of-trade deterioration on aggregate savings is decomposed into an income effect and a wealth effect. The income effect comes about because a terms-of-trade deterioration changes the value of the GDP. Its sign depends on the value of the rate of time preference relative to the interest rate. The wealth effect comes about because financial wealth is insurable and so income from capital is discounted at a lower rate than labor income. Its sign depends on the relative factor intensities of the goods.

Suggested Citation

  • Arman Mansoorian, 1992. "Income Effect, Wealth Effect, and the Terms of Trade with Finite Horizons," Canadian Journal of Economics, Canadian Economics Association, vol. 25(2), pages 474-484, May.
  • Handle: RePEc:cje:issued:v:25:y:1992:i:2:p:474-84

    Download full text from publisher

    File URL:
    Download Restriction: only available to JSTOR subscribers

    As the access to this document is restricted, you may want to search for a different version of it.


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Arman Mansoorian, 2014. "On the Monetary Approach to the Balance of Payments," Open Economies Review, Springer, vol. 25(4), pages 721-737, September.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cje:issued:v:25:y:1992:i:2:p:474-84. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Werner Antweiler). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.