Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect? / Maurice Obstfeld.

Format:

Book

Author/Creator:

Obstfeld, Maurice.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w0686.

NBER working paper series no. w0686

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Aggregate Spending and the Terms of Trade

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1981.

Summary:

This paper investigates the spending and current-account effects of permanent terms-of-trade shifts in a model where households maximize utility over an infinite planning period. In the framework we adopt, an economy specialized in production must experience a fall in aggregate spending and a current surplus when the terms of trade permanently deteriorate The model thus provides a counter-example to the argument of Laursen and Idetzler (1950) and Harberger (1950) that a permanent worsening in the terms of trade must produce a current-account deficit.

Notes:

Print version record

June 1981.