The Impact of Terms of Trade Shocks on a Small Open Economy: A Stochastic Analysis / Stephen J. Turnovsky.

Format:

Book

Author/Creator:

Turnovsky, Stephen J.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3916.

NBER working paper series no. w3916

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The Impact of Terms of Trade Shocks on a Small Open Economy

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1991.

Summary:

This paper investigates the impact of change in the terms of trade on the economic performance of a small economy. Both the effects of unanticipated shocks and changes in the mean and variance of the probability distribution generating these disturbances are discussed. In all cases, the key element determining the response of the economy is the effect on the rate of growth of real wealth, to which all other real quantities are directly tied in equilibrium. Conditions for the Harberger-Laursen-Metzler effect to hold are discussed. The impact of these changes on economic welfare, as measured by expected discounted utility of the representative agent is also addressed.

Notes:

Print version record

November 1991.