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What Causes Fluctuations in the Terms of Trade?

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  • Marianne Baxter
  • Michael A. Kouparitsas

Abstract

This paper investigates the sources of terms of trade volatility, specifically addressing the relative importance of goods-price effects vs. country-price effects. For fuel exporters, most of the terms of trade variation stems from goods-price effects, as one would have expected, a priori. For commodity exporters, there is great dispersion in the importance of goods price effects vs. country price effects, and no overall generalization is possible. Exporters of manufactured goods face terms of trade variation that appears to be about equally due to goods-price effects and country-price effects.

Suggested Citation

  • Marianne Baxter & Michael A. Kouparitsas, 2000. "What Causes Fluctuations in the Terms of Trade?," NBER Working Papers 7462, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:7462
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Cashin, Paul & Cespedes, Luis F. & Sahay, Ratna, 2004. "Commodity currencies and the real exchange rate," Journal of Development Economics, Elsevier, vol. 75(1), pages 239-268, October.
    2. Gabriel Gomes, 2016. "On the impact of dollar movements on oil currencies," EconomiX Working Papers 2016-1, University of Paris Nanterre, EconomiX.
    3. Nishat Fatima, 2010. "Analysing the Terms of Trade Effect for Pakistan," Trade Working Papers 22828, East Asian Bureau of Economic Research.
    4. Cédric Tille, 2000. ""Beggar-thy-neighbor" or "beggar-thyself"? the income effect of exchange rate fluctuations," Staff Reports 112, Federal Reserve Bank of New York.
    5. repec:bla:rdevec:v:14:y:2010:i:s1:p:683-698 is not listed on IDEAS
    6. Kiran Ijaz & Muhammad Zakaria & Bashir A. Fida, 2014. "Terms-of-Trade Volatility and Inflation in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 19(1), pages 111-132, Jan-June.
    7. Trofimov, Ivan D., 2018. "Income terms of trade and economic convergence: Evidence from Latin America," MPRA Paper 87598, University Library of Munich, Germany.
    8. Chen, Hongtao & Liu, Li & Wang, Yudong & Zhu, Yingming, 2016. "Oil price shocks and U.S. dollar exchange rates," Energy, Elsevier, vol. 112(C), pages 1036-1048.
    9. Christian Broda & Cédric Tille, 2003. "Coping with terms-of-trade shocks in developing countries," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Nov).
    10. Yan Zhou, 2010. "The Underlying Link between Fiscal Policy Patterns and International Reserves," Review of Development Economics, Wiley Blackwell, vol. 14(4), pages 712-725, November.
    11. Patrick A. Imam & Eleonara Granziera & Mr. Norbert Funke, 2008. "Terms of Trade Shocks and Economic Recovery," IMF Working Papers 2008/036, International Monetary Fund.
    12. Ferreira Filipe, Sara, 2012. "Equity order flow and exchange rate dynamics," Journal of Empirical Finance, Elsevier, vol. 19(3), pages 359-381.
    13. Chin Hee Hahn & Sung-Hyun Ryu, 2012. "Terms of Trade in Korea: Causes of Decline Since the Mid-1990s and Implications for Green Growth," Chapters, in: Chin Hee Hahn & Sang-Hyop Lee & Kyoung-Soo Yoon (ed.), Responding to Climate Change, chapter 7, Edward Elgar Publishing.
    14. Temitope L. A. Leshoro, 2023. "An Analysis of the Importance of Terms of Trade in South Africa Using Impulse Response Function," Global Business Review, International Management Institute, vol. 24(2), pages 243-257, April.
    15. Maria Socorro Gochoco‐Bautista & Dennis S. Mapa, 2010. "Linkages between Trade and Financial Integration and Output Growth in East Asia," Asian Economic Journal, East Asian Economic Association, vol. 24(1), pages 1-22, March.

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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