Coping with Terms-of-Trade Shocks in Developing Countries
7 Pages Posted: 11 Mar 2005
Sharp swings in a developing country's terms of trade - the price of its exports relative to the price of its imports - can seriously disrupt output growth. An analysis of the effects of a decline in export prices in seventy-five developing economies suggests that countries with a flexible exchange rate will experience a much milder contraction in output than their counterparts with fixed exchange rate regimes.
Keywords: terms of trade, exchange rate regime
JEL Classification: F31, F41
Suggested Citation: Suggested Citation