Unprecedented changes in the terms of trade

Mariano Kulish and Daniel Rees

Journal of International Economics, 2017, vol. 108, issue C, 351-367

Abstract: The development of Asia exposed commodity-exporting economies to unprecedented changes in their terms of trade. 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. An innovation of our analysis is to account in estimation for structural changes in the terms of trade. We find that long-run commodity prices increased by 35% in mid-2003 and that the volatility of shocks to commodity prices doubled soon after. The increase in the level of commodity prices is much smaller than single-equation estimates suggest. This is because our inferences rely on many observables that in general equilibrium also respond to shifts in the long-run level of the terms of trade.

JEL-codes: C11 F41 Q33 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (14)

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Working Paper: Unprecedented Changes in the Terms of Trade (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:108:y:2017:i:c:p:351-367

DOI: 10.1016/j.jinteco.2017.07.005

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