The Impact of terms of Trade Shocks on a Small Open Economy: A Stochastic Analysis
This paper investigates the impact of change in the terms of trade on the economic performance of a small economy. Both the effects of unanticipated shocks and changes in the mean and variance of the probability distribution generating these disturbances are discussed. In all cases, the key element determining the response of the economy is the effect on the rate of growth of real wealth, to which all other real quantities are directly tied in equilibrium. Conditions for the Harberger-Laursen-Metzler effect to hold are discussed. The impact of these changes on economic welfare, as measured by expected discounted utility of the representative agent is also addressed.
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|Date of creation:||1991|
|Contact details of provider:|| Postal: Box 353330, Seattle, WA 98193-3330|
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- Svensson, Lars E O & Razin, Assaf, 1983. "The Terms of Trade and the Current Account: The Harberger-Laursen-Metzler Effect," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 97-125, February.
- Sen, Partha & Turnovsky, Stephen J., 1989.
"Deterioration of the terms of trade and capital accumulation: A re-examination of the Laursen-Metzler effect,"
Journal of International Economics,
Elsevier, vol. 26(3-4), pages 227-250, May.
- 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.
- Bean, Charles R, 1984.
"The Terms of Trade, Labour Supply and the Current Account,"
CEPR Discussion Papers
22, C.E.P.R. Discussion Papers.
- Bean, Charles R, 1986. "The Terms of Trade, Labour Supply and the Current Account," Economic Journal, Royal Economic Society, vol. 96(380a), pages 38-46, Supplemen.
- Stulz, Rene M., 1988. "Capital mobility and the current account," Journal of International Money and Finance, Elsevier, vol. 7(2), pages 167-180, June.
- 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.
- Persson, Torsten & Svensson, Lars E O, 1985. "Current Account Dynamics and the Terms of Trade: Harberger-Laursen-Metzler Two Generations Later," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 43-65, February.
- James E. Anderson & John G. Riley, 1973.
"International Trade With Fluctuating Prices,"
UCLA Economics Working Papers
040, UCLA Department of Economics.
- Jerusalem D. Levhari & T. N. Srinivasan, 1969. "Optimal Savings under Uncertainty," Review of Economic Studies, Oxford University Press, vol. 36(2), pages 153-163.
- Maurice Obstfeld, 1981.
"Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect?,"
NBER Working Papers
0686, National Bureau of Economic Research, Inc.
- 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.
- Turnovsky, Stephen J & Shalit, Haim & Schmitz, Andrew, 1980. "Consumer's Surplus, Price Instability, and Consumer Welfare," Econometrica, Econometric Society, vol. 48(1), pages 135-152, January.
- A. Sandmo, 1970. "The Effect of Uncertainty on Saving Decisions," Review of Economic Studies, Oxford University Press, vol. 37(3), pages 353-360.
- Stephen J. Turnovsky, 1974. "Technological and Price Uncertainty in a Ricardian Model of International Trade," Review of Economic Studies, Oxford University Press, vol. 41(2), pages 201-217.
- Hanoch, Giora, 1977. "Risk Aversion and Consumer Preferences," Econometrica, Econometric Society, vol. 45(2), pages 413-426, March.
- Kiminori Matsuyama, 1988. "Terms-of-Trade, Factor Intensities and the Current Account in a Life-Cycle Model," Review of Economic Studies, Oxford University Press, vol. 55(2), pages 247-262.
- Lars E. O. Svensson, 1984. "Oil Prices, Welfare, and the Trade Balance," The Quarterly Journal of Economics, Oxford University Press, vol. 99(4), pages 649-672.
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