IDEAS home Printed from https://ideas.repec.org/p/ris/nzmedo/2006_004.html

A Smooth Ride: Terms of Trade, Volatility and GDP Growth

Author

Listed:
  • Arthur Grimes

    (Motu Economic & Public Policy Research, and University of Waikato)

Abstract

International evidence indicates that higher terms of trade levels and lower terms of trade volatility contribute to enhanced growth outcomes, especially for commodity-export and developing countries. New Zealand's terms of trade have been high and remarkably stable since the early 1990s compared with past experience. We analyse the proximate reasons behind these high, stable terms of trade and then examine whether this terms of trade behaviour explains growth outcomes since 1960. Attention is paid to growth outcomes over a variety of economic regimes. Approximately half the variance in annual GDP growth over 45 years can be explained by the level and volatility of the terms of trade. The relationship is robust across four economic regimes.

Suggested Citation

  • Arthur Grimes, 2006. "A Smooth Ride: Terms of Trade, Volatility and GDP Growth," Occasional Papers 06/4, Ministry of Economic Development, New Zealand.
    • Handle: RePEc:ris:nzmedo:2006_004
    as

    Download full text from publisher

    File URL: http://www.med.govt.nz/about-us/publications/publications-by-topic/occasional-papers/2006/06-04-pdf/view
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Su Dinh Thanh, 2015. "Threshold effects of infl ation on growth in the ASEAN-5 countries: A Panel Smooth Transition Regression approach," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 20(38), pages 41-48.
    2. Umer Shahzad & Xiaoyin He & Said Muhammad, 2023. "How Terms of Trade Impact Economic Growth: The Case of the United States," SAGE Open, , vol. 13(2), pages 21582440231, May.
    3. Adrian Tudor Tudorache & Luminița Nicolescu, 2023. "Insights about the Effects of COVID-19 on International Trade during the Main Pandemic Years in Romania and Poland," Sustainability, MDPI, vol. 15(11), pages 1-20, May.
    4. Dan Andrews & Daniel Rees, 2009. "Macroeconomic Volatility and Terms of Trade Shocks," RBA Research Discussion Papers rdp2009-05, Reserve Bank of Australia.
    5. Hock Wong, 2010. "Terms of trade and economic growth in Japan and Korea: an empirical analysis," Empirical Economics, Springer, vol. 38(1), pages 139-158, February.
    6. Daan Steenkamp, 2014. "How volatile are New Zealand’s terms of trade? An international comparison," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 77, pages 3-14, June.
    7. Khalil Jebran & Amjad Iqbal & Zia Ur Rehman Rao & Arshad Ali, 2018. "Effects of Terms of Trade on Economic Growth of Pakistan," Foreign Trade Review, , vol. 53(1), pages 1-11, February.
    8. Tarlok Singh, 2023. "Do terms of trade affect economic growth? Robust evidence from India," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(2), pages 491-521, April.
    9. Richard Fabling & Lynda Sanderson, 2008. "Firm Level Patterns in Merchandise Trade," Occasional Papers 08/3, Ministry of Economic Development, New Zealand.
    10. Piotr Misztal, 2012. "Terms of Trade and Economic Growth in Poland in the period 1980-2009," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(45), pages 51-67, December.
    11. Paul Dalziel & Caroline Saunders, 2018. "Treasury's refreshed views on New Zealand's economic strategy: a review article," New Zealand Economic Papers, Taylor & Francis Journals, vol. 52(1), pages 91-107, January.
    12. Khalil Jebran & Amjad Iqbal & Kalim-Ullah Bhat & Arshad Ali, 2018. "Effect of Terms of Trade on Economic Growth of China," Emerging Economy Studies, International Management Institute, vol. 4(2), pages 157-168, November.
    13. Grimes, Arthur & Hyland, Sean, 2013. "Passing the Buck: Impacts of Commodity Price Shocks on Local Outcomes," Motu Working Papers 189522, Motu Economic and Public Policy Research.
    14. Arthur Grimes, 2009. "Capital intensity and welfare: traded and non-trade sector determinants," New Zealand Economic Papers, Taylor & Francis Journals, vol. 43(1), pages 21-39.
    15. Buckle, Robert A. & Kim, Kunhong & Kirkham, Heather & McLellan, Nathan & Sharma, Jarad, 2007. "A structural VAR business cycle model for a volatile small open economy," Economic Modelling, Elsevier, vol. 24(6), pages 990-1017, November.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania
    • O56 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Oceania

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:nzmedo:2006_004. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hilary Devine The email address of this maintainer does not seem to be valid anymore. Please ask Hilary Devine to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/medgvnz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.