An empirical stylized fact is that primary exporters terms of trade worsen when the dollar appreciates and improves when the dollar depreciates. In our theoretical analysis, we demonstrate that a depreciation of the dollar will worsen a primary exporters terms of trade, the smaller the US share in the world market for the primary commmodity, the lower the US demand elasticty for that good, and the larger the US share in the exporter's imports. We present empirical findings that support the theoretical analysis. Also, we find strong cyclical sensitivity of real commodity prices and evidence of their secular decline.
Information
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Auteur
Fleisig, Heywood van Wijnbergen, Sweder
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Date du document
1985/07/31
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Type de document
Document de travail départemental
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Numéro du rapport
CPD8519
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Volume
1
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Total Volume(s)
1
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Pays
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Région
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Date de publication
2017/11/14
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Disclosure Status
Disclosed
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Titre du rapport
Primary commodity prices, the business cycle and the real exchange rate of the dollar
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Mots clé
Terms of trade; Business cycles; Exchange rates; Floating exchange rates; Analysis; Commodity prices; Theory
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