Relative Price Movements in Dynamic General Equilibrium Models of International Trade

David Backus (), Patrick J. Kehoe () and Finn E. Kydland

No 4243, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the behavior of international relative prices from the perspective of dynamic general equilibrium theory, with particular emphasis on the variability of the terms of trade and the relation between the terms of trade and net exports. We highlight aspects of the theory that are critical in determining these properties, contrast our perspective with those associated with the Marshall-Lerner condition and the Harberger-Laursen-Metzler effect, and point out features of the data that have proved difficult to explain within existing dynamic general equilibrium models.

Date: 1992-12
Note: ITI
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Related works:
Working Paper: Relative Price Movements in Dynamic General Equilibrium Models of International Trade (1992)
Working Paper: Relative price movements in dynamic general equilibrium models of international trade (1992)
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