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Terms-of-Trade Shocks are Not all Alike
Author:
Luciana Juvenalnull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2020: Issue 280
Language:
English
Publication Date:
11 Dec 2020
DOI:
https://doi.org/10.5089/9781513563916.001
ISBN:
9781513563916
ISSN:
1018-5941
Pages:
61
Keywords:
Commodity Prices; Business Cycles; World Shocks; WP; price shock; terms-of-trade shock; import share; export share; export price shock; import price shock; share exhibit
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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.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2020: Issue 280