Terms Of Trade Shocks And The Current Account
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Terms Of Trade Shocks And The Current Account
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Author : Mr.Paul Cashin
language : en
Publisher: International Monetary Fund
Release Date : 1998-12-01
Terms Of Trade Shocks And The Current Account written by Mr.Paul Cashin and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998-12-01 with Business & Economics categories.
This paper examines the relationship between terms of trade shocks, private saving, and the current account position. The relationship between these variables is theoretically ambiguous: an adverse transitory terms of trade shock can either induce a deterioration or an improvement in the current account, depending on whether the resulting income effects are greater or less than the resulting substitution effects. The substitution effects involve both intertemporally substituting consumption and intratemporally substituting consumption between importables and nontradables. The relative strength of these substitution effects is estimated using data for five OECD countries during 1970/95; both are found to exert large and significant effects on the current account balance.
The Response Of The Current Account To Terms Of Trade Shocks
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Author : Christopher J. Kent
language : en
Publisher: International Monetary Fund
Release Date : 2003-07-01
The Response Of The Current Account To Terms Of Trade Shocks written by Christopher J. Kent and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003-07-01 with Business & Economics categories.
Is the relationship between the current account balance and the terms of trade affected by the persistence of terms of trade shocks? In intertemporal models of the current account that incorporate a consumption-smoothing and an investment response to shocks, the effect of the terms of trade on external balances is predicted to be dependent on the duration of terms of trade shocks. Using a median-unbiased estimator, an unbiased model-selection rule, and terms of trade data for 128 countries over the period 1960-99 we identify two groups of countries-those that typically experience temporary terms of trade shocks and those that typically experience permanent terms of trade shocks. The results from panel-data regressions of the two groups of countries support the theoretical predictions of the intertemporal approach to the current account. We find that the greater (lesser) the persistence of the terms of trade shock, the more (less) the investment effect dominates the consumption-smoothing effect on saving, so that the current account balance moves in the opposite (same) direction as that of the shock.
Terms Of Trade Shocks And The Current Account
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Author : Paul Anthony Cashin
language : en
Publisher:
Release Date : 2006
Terms Of Trade Shocks And The Current Account written by Paul Anthony Cashin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
This paper examines the relationship between terms of trade shocks, private saving, and the current account position. The relationship between these variables is theoretically ambiguous: an adverse transitory terms of trade shock can either induce a deterioration or an improvement in the current account, depending on whether the resulting income effects are greater or less than the resulting substitution effects. The substitution effects involve both intertemporally substituting consumption and intratemporally substituting consumption between importables and nontradables. The relative strength of these substitution effects is estimated using data for five OECD countries during 1970/95; both are found to exert large and significant effects on the current account balance.
Terms Of Trade Shocks And The Current Account
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Author : Paul Cashin
language : en
Publisher:
Release Date : 1999
Terms Of Trade Shocks And The Current Account written by Paul Cashin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with Balance of payments categories.
Emerging Economy Business Cycles
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Author : Rudrani Bhattacharya
language : en
Publisher: International Monetary Fund
Release Date : 2013-05-22
Emerging Economy Business Cycles written by Rudrani Bhattacharya and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-05-22 with Business & Economics categories.
This paper analyses the extent to which financial integration impacts the manner in which terms of trade affect business cycles in emerging economies. Using a s mall open economy model, we show that as capital account openness increases in an economy that faces trade shocks, business cycle volatility reduces. For an economy with limited financial openness, and a relatively open trade account, a model with exogenous terms of trade shocks is able to replicate the features of the business cycle.
Macroeconomic Effects Of Terms Of Trade Shocks
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Author : Nikola Spatafora
language : en
Publisher: World Bank Publications
Release Date : 1999
Macroeconomic Effects Of Terms Of Trade Shocks written by Nikola Spatafora and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with categories.
January 1995 The authors investigate the impact on economic growth and development of long-run movements in the external terms of trade, with special reference to the experience of 18 oil-exporting countries between 1973 and 1989. They argue that this sample approximates a controlled experiment for examining the impact of unanticipated -- but permanent -- shocks to the terms of trade. They analyze the sample econometrically using panel data techniques. They find that permanent terms-of-trade shocks have a strongly significant positive effect on investment, which they justify theoretically on the grounds that countries in the sample import much of their capital equipment. The shocks also have a significant positive effect on consumption. Government consumption responds almost twice as strongly as private consumption. The shocks have no effect on savings and adversely affect the trade and current account balances. There is a significant positive effect on the output of all main categories of nontradables. But Dutch disease effects are strikingly absent. Agriculture and manufacturing do not contract in reaction to an oil price increase. Dutch disease effects may be absent in part because of policy-induced output restraints in the oil sector, or because of the enclave nature of the oil sector, which does not participate in domestic factor markets.
The Balance Of Trade The Terms Of Trade And The Real Exchange Rate
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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 1988-01-01
The Balance Of Trade The Terms Of Trade And The Real Exchange Rate written by International Monetary Fund and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1988-01-01 with Business & Economics categories.
This paper uses an intertemporal optimizing model of a small open economy to analyze how terms of trade changes affect real exchange rates and the trade balance. We consider temporary current, anticipated future, and permanent changes in the terms of trade. The results suggest that the relationship between the terms of trade and the current account (the so-called Harberger-Laursen-Metzler effect) may be quite sensitive to whether or not the model incorporates nontraded goods. Thus, the real exchange rate may be an important variable through which terms of trade shocks are transmitted to the current account.
Macroeconomic And Sectoral Effects Of Terms Of Trade Shocks
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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 1999-10-01
Macroeconomic And Sectoral Effects Of Terms Of Trade Shocks written by International Monetary Fund and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999-10-01 with Business & Economics categories.
This paper investigates the impact of long-run terms-of-trade shocks. Analytically, we show that, if capital goods are largely importable or the labor supply is sufficiently elastic, then natural-resource booms increase aggregate investment and worsen the current account, but Dutch ‘Disease’ effects are weak. We then examine 18 oil-exporting developing countries during 1965-89. Favorable terms-of-trade shocks increase investment and (especially government) consumption, but reduce medium-term savings; hence, the current account deteriorates. Nontradable output increases, in response to real appreciations, but Dutch Disease effects are strikingly absent. Investment, consumption, and nontradable output respond more to a terms-of-trade decline than to an increase.
Sharp Reductions In Current Account Deficits
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Author : Mr.Gian Milesi-Ferretti
language : en
Publisher: International Monetary Fund
Release Date : 1997-12-01
Sharp Reductions In Current Account Deficits written by Mr.Gian Milesi-Ferretti and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997-12-01 with Business & Economics categories.
The paper studies determinants and consequences of sharp reductions in current account imbalances (reversals) in low- and middle-income countries. It poses two questions: what triggers reversals, and what factors explain how costly reversals are? It finds that both domestic variables, such as the current account balance, openness to trade, and the level of reserves, and external variables, such as terms of trade shocks, U.S. real interest rates, and growth in industrial countries, seem to play important roles in explaining reversals in current account imbalances. It also finds some evidence that countries with a less appreciated real exchange rate, higher investment, and more openness before the reversal tend to grow faster after a reversal occurs.
Dynamic Response To Foreign Transfers And Terms Of Trade Shocks In Open Economies
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Author : Klaus Schmidt-Hebbel
language : en
Publisher: World Bank Publications
Release Date : 1992
Dynamic Response To Foreign Transfers And Terms Of Trade Shocks In Open Economies written by Klaus Schmidt-Hebbel and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 1992 with Comercio internacional categories.
Both permanent and transitory disturbances can change long- run capacity and output -- although they may have opposite effects on the current account. Liquidity constraints and wage rigidities tend to amplify the cyclical adjustment to external shocks.