The trade balance and the terms of trade in a two-country two-sector OLG economy
We consider a two-country, two-sector OLG model. It is shown that the trade balance and the relative price of exports are always positively related when exports are labor intensive regardless of the elasticity of intertemporal substitution in consumption. A large response of savings to future prices becomes a sufficient condition for an inverse relation between these variables only if exports are capital intensive. In this case, a rise in the terms of trade can be followed by a trade balance decline if consumption goods are capital intensive and the income effect implied on savings is negative and large.
Volume (Year): 3 (2001)
Issue (Month): 1 ()
|Contact details of provider:|| Postal: |
Phone: +34 94 6013783
Fax: + 34 94 6013774
Web page: http://link.springer.de/link/service/journals/10108/index.htm
More information through EDIRC
|Order Information:||Web: http://link.springer.de/orders.htm|
When requesting a correction, please mention this item's handle: RePEc:spr:specre:v:3:y:2001:i:1:p:71-80. 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: (Sonal Shukla)or (Christopher F Baum)
If references are entirely missing, you can add them using this form.