## Terms-of-Trade Shocks are Not all Alike

_IMF Working Papers, December 11, 2020_

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## Bibliographic details
- Authors: Luciana Juvenal
- Published: December 11, 2020
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513563916.001

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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 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.

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_Source: https://www.imf.org/en/publications/wp/issues/2020/12/11/terms-of-trade-shocks-are-not-all-alike-49920_