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.
Details
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Author
Fleisig, Heywood van Wijnbergen, Sweder
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Document Date
1985/07/31
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Document Type
Departmental Working Paper
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Report Number
CPD8519
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2017/11/14
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Disclosure Status
Disclosed
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Doc Name
Primary commodity prices, the business cycle and the real exchange rate of the dollar
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Keywords
Terms of trade; Business cycles; Exchange rates; Floating exchange rates; Analysis; Commodity prices; Theory
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Citation
Fleisig, Heywood van Wijnbergen, Sweder
Primary commodity prices, the business cycle and the real exchange rate of the dollar (English). Country Policy Department discussion paper,no. CPD 1985-19 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/238311492000793298/Primary-commodity-prices-the-business-cycle-and-the-real-exchange-rate-of-the-dollar