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Terms of Trade Shocks in Africa - Are They Short-Lived or Long-Lived? (Electronic book text)
Terms of Trade Shocks in Africa - Are They Short-Lived or Long-Lived? (Electronic book text): Paul Cashin
Terms of Trade Shocks in Africa - Are They Short-Lived or Long-Lived? (Electronic book text): Paul Cashin

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Terms of Trade Shocks in Africa - Are They Short-Lived or Long-Lived? (Electronic book text)

Paul Cashin

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A country's terms of trade is one of the most important relative prices in economics, yet economists are largely ignorant of many of its empirical properties. The ratio of an index of a country's export prices to the prices of its imported goods defines the net barter terms of trade (NBTT), which measures the number of units of imports that can be exchanged for a unit of exports. Particularly for commodity-exporting developing countries, movements in the NBTT are key determinants of a country's macroeconomic performance, and have an important impact on real national incomes. For example, arabica coffee is the dominant exportable of Ethiopia. The slump in world arabica coffee prices in 1986-87, largely caused by world production in excess of consumption, resulted in a 40 percent fall in Ethiopia's terms of trade. As imports were about 15 percent of its national expenditure, this adverse movement in its terms of trade resulted in about a 6 percent decline in Ethiopia's real income. Such terms of trade-induced shocks to real incomes in developing countries necessitate a domestic policy response, but in framing an appropriate response, an important question is how long-lasting are typical shocks?

General

Imprint: International Monetary Fund
Country of origin: United States
Release date: 2000
Authors: Paul Cashin
Format: Electronic book text
Pages: 53
ISBN-13: 978-1-281-27148-8
Barcode: 9781281271488
Categories: Books
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LSN: 1-281-27148-9

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