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The Harberger-Laursen-Metzler Effect. Theory and Practice in Poland

  • Piotr Misztal

    ()

    (Radom Technical University, Poland)

The aim of the article is analyses of the Harberger-Laursen-Metzler effect in light of the theory and in practice, with particular reference to this effect in Poland in the period 1995-2009. The results of research carried out by means of the vector autoregression model (VAR) revealed that temporary improvement in terms of trade in Poland led to the current account improvement, and permanent improvement in terms of trade contributed to the current account deterioration. Thus it was confirmed prevalence of the Harberger-Laursen-Metzler effect in Poland. Additionally, results of investigation confirmed relatively greater impact of temporary changes in terms of trade on the current account than in the case of permanent changes in terms of trade. Analogous interdependence was revealed witch reference to clarification of the current account variability. Temporary changes in terms of trade accounted for in much more extent the current account variability in relation to permanent changes in terms of trade.

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Article provided by Department of International Business and Economics from the Academy of Economic Studies Bucharest in its journal Romanian Economic Journal.

Volume (Year): 13 (2010)
Issue (Month): 38 (December)
Pages: 129-146

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Handle: RePEc:rej:journl:v:13:y:2010:i:38:p:129-146
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  1. Partha Sen & Stephen J. Turnovsky, 1988. "Deterioration of the Terms of Trade and Capital Accumulation: A Reexamination of the Laursen-Metzler Effect," NBER Working Papers 2616, National Bureau of Economic Research, Inc.
  2. Aaron Tornell & Philip Lane, 1994. "Are Windfalls a Curse? A Non-Representative Agent Model of the Current Account and Fiscal Policy," NBER Working Papers 4839, National Bureau of Economic Research, Inc.
  3. Mohsen Bahmani-Oskooee, 1998. "Cointegration Approach to Estimate the Long-Run Trade Elasticities in LDCs," International Economic Journal, Taylor & Francis Journals, vol. 12(3), pages 89-96.
  4. Reinhart, Carmen & Ostry, Jonathan, 1991. "Private Saving and Terms of Trade Shocks," MPRA Paper 13716, University Library of Munich, Germany.
  5. Maurice Obstfeld, 1982. "Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect?," The Quarterly Journal of Economics, Oxford University Press, vol. 97(2), pages 251-270.
  6. Chowdhury, Abdur R., 2003. "Do asymmetric terms of trade shocks affect private savings in a transition economy?," BOFIT Discussion Papers 3/2003, Bank of Finland, Institute for Economies in Transition.
  7. Torsten Persson & Lars E.O. Svensson, 1983. "Current Account Dynamics and the Terms of Trade: Harberger-Laursen-Metzler Two Generations Later," NBER Working Papers 1129, National Bureau of Economic Research, Inc.
  8. Agenor, Pierre-Richard & Aizenman, Joshua, 2004. "Savings and the terms of trade under borrowing constraints," Journal of International Economics, Elsevier, vol. 63(2), pages 321-340, July.
  9. Paul Cashin & Christopher J. Kent, 2003. "The Response of the Current Account to Terms of Trade Shocks; Persistence Matters," IMF Working Papers 03/143, International Monetary Fund.
  10. Roberto Duncan, 2003. "The Harberger-Laursen-Metzler Effect Revisited: An Indirect-Utility-Function Approach," Working Papers Central Bank of Chile 250, Central Bank of Chile.
  11. Chowdhury, Abdur R., 2003. "Do asymmetric terms of trade shocks affect private savings in a transition economy?," BOFIT Discussion Papers 3/2003, Bank of Finland, Institute for Economies in Transition.
  12. Jonathan David Ostry & Carmen Reinhart, 1991. "Private Saving and Terms of Trade Shocks; Evidence From Developing Countries," IMF Working Papers 91/100, International Monetary Fund.
  13. Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201119.
  14. Abdur R. Chowdhury, 2003. "Do asymmetric terms of trade shocks affect private savings in a transition economy?," Macroeconomics 0303006, EconWPA.
  15. Eicher, Theo S. & Schubert, Stefan F. & Turnovsky, Stephen J., 2008. "Dynamic effects of terms of trade shocks: The impact on debt and growth," Journal of International Money and Finance, Elsevier, vol. 27(6), pages 876-896, October.
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