Unprecedented Changes in the Terms of Trade

Mariano Kulish and Daniel Rees

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: The ongoing development of Asia has led to unprecedented changes in the terms of trade of commodity-exporting economies. Using a small open economy model we estimate changes in the long-run level and variance of Australia's terms of trade and study the quantitative implications of these changes. We find that the long-run prices of commodities that Australia exports started to increase significantly in mid 2003 and that the volatility of shocks to commodity prices doubled soon after. The persistent increase in the level of commodity prices is smaller than single-equation estimates suggest, but our inferences rely on many observables that in general equilibrium also respond to shifts in the long-run level of the terms of trade.

Keywords: Bayesian analysis; open economy macroeconomics; terms of trade (search for similar items in EconPapers)
JEL-codes: C11 F41 Q33 (search for similar items in EconPapers)
Date: 2015-08
New Economics Papers: this item is included in nep-int, nep-opm and nep-sea
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Citations: View citations in EconPapers (9)

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Journal Article: Unprecedented changes in the terms of trade (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:rba:rbardp:rdp2015-11

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