Terms-of-Trade Shocks are Not all Alike

Author/Editor:

Federico Di Pace ; Luciana Juvenal ; Ivan Petrella

Publication Date:

December 11, 2020

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

When analyzing terms-of-trade shocks, it is implicitly assumed that the economy responds symmetrically to changes in export and import prices. Using a sample of developing countries our paper shows that this is not the case. We construct export and import price indices using commodity and manufacturing price data matched with trade shares and separately identify export price, import price, and global economic activity shocks using sign and narrative restrictions. Taken together, export and import price shocks account for around 40 percent of output fluctuations but export price shocks are, on average, twice as important as import price shocks for domestic business cycles.

Series:

Working Paper No. 2020/280

Frequency:

regular

English

Publication Date:

December 11, 2020

ISBN/ISSN:

9781513563916/1018-5941

Stock No:

WPIEA2020280

Format:

Paper

Pages:

61

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