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Decomposing Terms of Trade Fluctuations in Ethiopia

  • Josef L. Loening


    (World Bank, Washington)

  • Masato Higashi

    (Columbia University)

This paper proposes a technique to decompose short-run fluctuations in the terms of trade. Using Ethiopia as an example, we decompose the commodity terms of trade into various components to measure the impact of price and volume shifts as well as export diversification. We use monthly data from the past decade, including periods during the global food and financial crises. Our findings suggest that diversification out of traditional coffee exports to other export commodities successfully mitigated a terms of trade shock. Continued export diversification will be beneficial.

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Paper provided by Ibero-America Institute for Economic Research in its series Ibero America Institute for Econ. Research (IAI) Discussion Papers with number 205.

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Length: 11 pages
Date of creation: 08 Oct 2010
Date of revision:
Handle: RePEc:got:iaidps:205
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  1. Cashin, Paul & McDermott, C. John & Pattillo, Catherine, 2004. "Terms of trade shocks in Africa: are they short-lived or long-lived?," Journal of Development Economics, Elsevier, vol. 73(2), pages 727-744, April.
  2. Fátima Cardoso & Paulo Soares Esteves, 2008. "What is behind the recent evolution of Portuguese terms of trade?," Working Papers w200805, Banco de Portugal, Economics and Research Department.
  3. Marianne Baxter & Michael A. Kouparitsas, 2006. "What Can Account for Fluctuations in the Terms of Trade?," International Finance, Wiley Blackwell, vol. 9(1), pages 63-86, 05.
  4. Blattman, Christopher & Hwang, Jason & Williamson, Jeffrey G., 2007. "Winners and losers in the commodity lottery: The impact of terms of trade growth and volatility in the Periphery 1870-1939," Journal of Development Economics, Elsevier, vol. 82(1), pages 156-179, January.
  5. Loening, Josef L. & Durevall, Dick & Birru, Yohannes A., 2009. "Inflation dynamics and food prices in an agricultural economy : the case of Ethiopia," Policy Research Working Paper Series 4969, The World Bank.
  6. Lloyd, P. J. & Procter, R. G., 1983. "Commodity decomposition of export-import instability : New Zealand," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 41-57.
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