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Co-movements in terms of trade volatility in land-abundant countries

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  • María Virginia Mattheus
  • Alberto Martín Díaz Cafferata

Abstract

We conjecture that extreme land abundant endowment constitutes a structural restriction driving sectoral specialization and terms of trade volatility. We estimate and compare several volatility indicators for Argentina, Australia and New Zealand in 1870-2009 finding co-movements, structural breaks in variability, significant cross correlations between TOT cycles, and in some cases heteroskedasticity. If “first nature” land-abundance is a long-term structural restriction, development policies for this type of economies must balance reductions in TOT volatility through export diversification (at rising costs) and a combination of efficiency improvements and internal flexibility to manage volatility effects.

Suggested Citation

  • María Virginia Mattheus & Alberto Martín Díaz Cafferata, 2011. "Co-movements in terms of trade volatility in land-abundant countries," Working Papers 07/11, Instituto Universitario de Análisis Económico y Social.
    • Handle: RePEc:uae:wpaper:0711
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