IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Inequality in Exchange: The Use of a World Trade Flow Table for Analyzing the International Economy

  • Utz-Peter Reich
Registered author(s):

    Whether or not the terms of trade between two countries may be unequal is a controversial question in the theory of international economics. In practice, the issue is resolved through statistical observation of the terms of trade. This measurement of the terms of trade follows a long tradition and produces impressive detail. It is, however, restricted in scope, because the first derivative, the change of the terms over time is observed only. Absolute levels depend on which year is chosen as the base year, a choice that is rather arbitrary and carries no theoretical meaning. Equality in the levels of terms of trade remains thus undefined. More precisely, it is always assumed to exist implicitly for whichever base year is being nominated. The paper proposes an answer to this ambiguity based on the relatively new statistical tool of international purchasing power compilation. The terms of trade are crucially dependent on the rate of foreign exchange (for which exports are traded against imports), which is predominantly governed by financial rather than commodity markets. Hence, the paper proposes to separate the two factors of influence and to call terms of trade 'equal' if the effective real exchange rate (as derived from the nominal exchange rate by means of purchasing power parities) equals one. On that basis a world trade flow table is constructed, putting the compiled equalities and inequalities in trade into a coherent, global perspective.

    If you experience problems downloading a file, check if you have the proper application to view it first. 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:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Taylor & Francis Journals in its journal Economic Systems Research.

    Volume (Year): 19 (2007)
    Issue (Month): 4 ()
    Pages: 375-395

    in new window

    Handle: RePEc:taf:ecsysr:v:19:y:2007:i:4:p:375-395
    Contact details of provider: Web page:

    Order Information: Web:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:taf:ecsysr:v:19:y:2007:i:4:p:375-395. 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: (Michael McNulty)

    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.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.