Terms of Trade Shocks and Economic Recovery

ByPatrick A. Imam, Eleonara Granziera, Norbert Funke

February 1, 2008

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper identifies factors that contribute to a fast recovery in growth after persistent negative terms of trade shocks, using a sample of 159 countries for 1970-2006. The results suggest that policies matter. Fast recoveries are fairly robustly related to real exchange rate depreciation and improvements in government stability and the institutional environment. A timely increase in aid may also support recovery.

Subject: Budget planning and preparation, Exchange rate adjustments, Real effective exchange rates, Real exchange rates, Terms of trade

Keywords: exchange rate, terms of trade shock, WP

Pages:
23
Volume:
2008
DOI:
https://doi.org/10.5089/9781451868982.001
Issue:
036
Series:
Working Paper No. 2008/036
Stock No:
WPIEA2008036
ISBN:
9781451868982
ISSN:
1018-5941

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