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What is behind the recent evolution of Portuguese terms of trade?


  • Fátima Cardoso
  • Paulo Soares Esteves


This paper analyses the evolution of Portuguese terms of trade over the last decades. Firstly, their evolution is described: (i) terms of trade registered an upward trend since the second half of the 80s, after the apparent stability observed since 1950; (ii) this was a generalized phenomenon across OECD countries; (iii) and it was specially linked to a very contained evolution of import prices. Secondly, terms of trade are broken down by groups of products, and their evolution is decomposed into two components. The first component results from differences in the composition of import and export baskets of goods (inter-sector specialization), while the second emerges from deviations from the law of one price in each sector (intra-sector segmentation). The results show that terms of trade developments were dominated by the specialization effects related to the evolution of oil prices. Excluding energy and focusing in the manufactured goods, the increase in terms of trade is strongly connected with the positive evolution of relative prices inside each sector, in particular in the usually designated traditional sectors: textiles, clothing and footwear. The effects of globalization on import prices and the structural changes in those manufacturing sectors in Portugal are pointed out as explanations for this phenomenon.

Suggested Citation

  • 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.
  • Handle: RePEc:ptu:wpaper:w200805

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    References listed on IDEAS

    1. 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, May.
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    Cited by:

    1. Josef Loening & Masato Higashi, 2011. "Decomposing terms of trade fluctuations in Ethiopia," Applied Economics Letters, Taylor & Francis Journals, vol. 18(13), pages 1219-1224.
    2. Carlos Figueira, 2017. "Determinants of the Portuguese GDP stagnation during the 2001-2014 period: an empirical investigation," GEE Papers 0068, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Mar 2017.

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade


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