Terms of trade and current account fluctuations: The Harberger-Laursen-Metzler effect revisited

Hafedh Bouakez () and Takashi Kano ()

Journal of Macroeconomics, 2008, vol. 30, issue 1, pages 260-281

Abstract: This paper investigates whether extending the intertemporal model of the current account to allow for variations in the terms of trade improves its ability to fit the data. It derives a testable present-value representation of the current account that encompasses the Harberger-Laursen-Metzler (HLM) effect, according to which a temporary rise in the terms of trade improves the current account. The present-value model is tested using data from Australia, Canada, and the United Kingdom. The results show that terms-of-trade movements do not affect the current account in a significant way, and that, in two of the three cases, the model is strongly rejected by the data.

Date: 2008

Downloads: (external link)
http://www.sciencedirect.com/science/article/B6X4M ... 3d15943c7f94afec3dbb
Full text for ScienceDirect subscribers only

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: http://EconPapers.repec.org/RePEc:eee:jmacro:v:30:y:2008:i:1:p:260-281

Access Statistics for this article

Journal of Macroeconomics is edited by Douglas McMillin and Theodore Palivos

More articles in Journal of Macroeconomics from Elsevier
Series data maintained by Heidi Boesdal ().