Terms-of-Trade Shocks are Not all Alike
IMF Working Papers, December 11, 2020
Source details
- Canonical URL
- Terms-of-Trade Shocks are Not all Alike
Other formats
Bibliographic details
- Authors: Luciana Juvenal
- Published: December 11, 2020
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513563916.001
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 the paper shows that this is not the case.
- Taken together, export and import price shocks account for around 40 percent of output fluctuations.
- Export price shocks are, on average, twice as important as import price shocks for domestic business cycles.
Methodology
- Construct export and import price indices using commodity and manufacturing price data matched with trade shares.
- Separately identify export price, import price, and global economic activity shocks using sign and narrative restrictions.
- Sample: developing countries.
Core findings
- Export and import price shocks jointly explain around 40 percent of output fluctuations.
- Export price shocks play a substantially larger role than import price shocks: export price shocks are, on average, twice as important as import price shocks for domestic business cycles.
Content in this bundle
- Working Paper