Terms of Trade in the Medium-run
This paper contributes to empirical research on the dynamics of the terms of trade. We start by proposing a method for constructing different measures of the terms of trade. This is achieved by estimating a range of substitution elasticities using a panel data approach and highly disaggregated data on trade flows. Next, various measures of the terms of trade and trade margins are related to productivity and demand proxies. We find that domestic demand side movements are positively related to the terms of trade, while domestic productivity gains result in a deterioration of the terms of trade. Our results suggest that higher relative productivity raises the real component of exports relative to imports along the intensive margin inducing a weakening of the terms of trade.
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- Vahagn Galstyan, 2011. "Productivities, Trade, and Relative Prices in a Ricardian World," The Institute for International Integration Studies Discussion Paper Series iiisdp359, IIIS.
- Paolo Epifani & Gino Gancia, 2009.
"Openness, Government Size and the Terms of Trade,"
Review of Economic Studies,
Oxford University Press, vol. 76(2), pages 629-668.
- Paolo Epifani & Gino Gancia, 2008. "Openness, Government Size and the Terms of Trade," IEW - Working Papers 359, Institute for Empirical Research in Economics - University of Zurich.
- Paolo Epifani & Gino Gancia, 2005. "Openness, government size and the terms of trade," Economics Working Papers 915, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2008.
- repec:bla:restud:v:76:y:2009:i:2:p:629-668 is not listed on IDEAS
- Guillaume Gaulier & Isabelle Méjean, 2006. "Import Prices, Variety and the Extensive Margin of Trade," Working Papers 2006-17, CEPII research center.
- Corsetti, Giancarlo & Martin, Philippe & Pesenti, Paolo, 2007. "Productivity, terms of trade and the `home market effect'," Journal of International Economics, Elsevier, vol. 73(1), pages 99-127, September.
- Guillaume Gaulier & Soledad Zignago, 2010. "BACI: International Trade Database at the Product-Level. The 1994-2007 Version," Working Papers 2010-23, CEPII research center.
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