How Important Are Terms Of Trade Shocks?

Stephanie Schmitt-Grohe and Martín Uribe ()

No 21253, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: According to conventional wisdom, terms of trade shocks represent a major source of business cycles in emerging and poor countries. This view is largely based on the analysis of calibrated business-cycle models. We argue that the view that emerges from empirical SVAR models is strikingly different. We estimate country-specific SVARs using data from 38 emerging and countries and find that terms-of-trade shocks explain less than 10 percent of movements in aggregate activity. We then build a three-sector open economy model and estimate key structural parameters country by country. We find that at the country level there is a disconnect between the empirical and theoretical models in the importance assigned to terms-of-trade shocks.

JEL-codes: E32 F41 F44 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-int, nep-mac and nep-opm
Note: IFM
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Citations: View citations in EconPapers (37)

Published as Stephanie Schmitt-Grohé & Martín Uribe, 2018. "HOW IMPORTANT ARE TERMS-OF-TRADE SHOCKS?," International Economic Review, vol 59(1), pages 85-111.

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Related works:
Working Paper: How Important Are Terms of Trade Shocks (2016)
Working Paper: How Important Are Terms Of Trade Shocks? (2015)
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