IMF Working Papers

Terms-of-Trade Shocks are Not all Alike

By Federico Di Pace, Luciana Juvenal, Ivan Petrella

December 11, 2020

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Federico Di Pace, Luciana Juvenal, and Ivan Petrella. Terms-of-Trade Shocks are Not all Alike, (USA: International Monetary Fund, 2020) accessed October 8, 2024

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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.

Subject: Commodities, Export prices, Exports, Import prices, Terms of trade

Keywords: Business Cycles, Commodity Prices, Export price shock, Export share, Import price shock, Import share, Price shock, Share exhibit, Terms-of-trade shock, World Shocks, WP

Publication Details

  • Pages:

    61

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2020/280

  • Stock No:

    WPIEA2020280

  • ISBN:

    9781513563916

  • ISSN:

    1018-5941