EconPapers    
Economics at your fingertips  
 

The Terms of Trade, the Real Exchange Rate, and Economic Fluctuations

Enrique Mendoza

International Economic Review, 1995, vol. 36, issue 1, 101-37

Abstract: This paper examines the relationship between terms of trade and business cycles using a three-sector intertemporal equilibrium model and a large multicountry database. Results show that terms-of-trade shocks account for nearly one-half of actual GDP variability. The model explains weak correlations between net exports and terms of trade (the Harberger, Laursen, and Metzler effect), and produces large and weakly correlated deviations from purchasing power parity and real interest rate parity. Terms-of-trade shocks cause real appreciations and positive interest differentials, although productivity shocks have opposite effects. The puzzle that welfare gains of international asset trading are negligible is left unresolved. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1995
References: Add references at CitEc
Citations: View citations in EconPapers (733)

Downloads: (external link)
http://links.jstor.org/sici?sici=0020-6598%2819950 ... 0.CO%3B2-0&origin=bc full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ier:iecrev:v:36:y:1995:i:1:p:101-37

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0020-6598
subscrip@blackwellpub.com

Access Statistics for this article

International Economic Review is currently edited by Harold L. Cole

More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297. Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing (jdl@wiley.com) and (baum@bc.edu).

 
Page updated 2024-10-18
Handle: RePEc:ier:iecrev:v:36:y:1995:i:1:p:101-37