Terms of trade fluctuations and economic growth in developing economies

Basu, Parantap; McLeod, Darryl

doi:10.1016/0304-3878(91)90083-8

Cited by 48 publications

(34 citation statements)

References 18 publications

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“…The results in columns 3, 5, 7 and 9 indicate that countries with greater potential exposure to trade shocks (as measured by the share of exports to GDP) benefit significantly more from faster ToT improvements. This result simply echoes the findings in Blattman et al (2007) and consistent with the model in Basu and McLeod (1991) predicting that in more open economies a given terms of trade shock has a larger permanent component and causes larger swings in growth rates.…”

Section: Estimation Resultssupporting

confidence: 91%

“…As countries open up, favorable ToT movements would be akin to technological improvements that expand the production possibilities frontier. Several developing country studies find that increasing commodity prices improve growth performance (Basu and McLeod 1991;Deaton and Miller 1996;Mendoza 1997;Deaton 1999). Resource curse arguments, on the other hand, predict the opposite.…”

Section: Introductionmentioning

confidence: 93%

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Trade and income growth in the Ottoman Empire: assessing the role of volatility and trend growth in terms of trade

Arbatlı

2015

Eurasian Econ Rev

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This paper focuses on the Ottoman economy from the beginning of the nineteenth century until the early twentieth century when the first wave of economic globalization coupled with the sweeping forces of rapid industrialization in the West led to major structural changes that are deemed to be responsible for the Great Divergence in income levels. An important part of this process for the Ottoman economy and the rest of the Periphery was secular improvements and increased volatility in the relative price of exports compared to imports, i.e., the terms of trade (ToT). A large body of literature suggests that both the changes in and the volatility of ToT may affect economic development in different ways. We present empirical predictions for Ottoman income growth under various counterfactual ToT scenarios to offer a perspective on the absolute and relative importance of ToT volatility and ToT growth for the Ottoman economy. According to our findings, Ottoman GDP per capita could have grown about 0.63-0.80 percentage points faster on average per year over the period 1800-1870, if the Empire faced only half the decadal ToT volatility it actually experienced over the same period.Keywords Terms of trade Á Growth Á Volatility Á Ottoman Empire Á PeripheryCemal Eren Arbatli thanks the anonymous referees for their constructive comments. & Cemal Eren Arbatli

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Section: Estimation Resultssupporting

confidence: 91%

Section: Introductionmentioning

confidence: 93%

Trade and income growth in the Ottoman Empire: assessing the role of volatility and trend growth in terms of trade

Arbatlı

2015

Eurasian Econ Rev

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“…Another might be that the increase in the purchasing power of exports encourages the purchase of productivity-enhancing intermediate goods and equipment that often must be imported by developing countries. Basu and McLeod (1992) model this effect and find supportive evidence for twelve developing countries, mostly in Latin America. Similarly, Deaton and Miller (1996) and Deaton (1999) find that a sharp increase in commodity prices in Africa is associated with increases in both the level and growth rate of per capita income.…”

Section: Theory and Evidence On The Terms Of Trade And Developmentmentioning

confidence: 75%

Winners and losers in the commodity lottery: The impact of terms of trade growth and volatility in the Periphery 1870–1939

Blattman

Hwang

Williamson

2007

Journal of Development Economics

271

199

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“…For example, Basu and McLeod (1992), Mendoza (1995), andAgénor et al (1999) find that terms of trade shocks significantly affect output fluctuations in developing countries. Similarly, Kose and Riezman (2001) and Bleaney and Greenaway (2001) find that trade shocks significantly explain output fluctuations in Africa.…”

Section: Review Of Literaturementioning

confidence: 97%