Terms of Trade Shocks in Africa Are They Short-Lived or Long-Lived?

Abstract

This paper examines the persistence of shocks to the terms of trade, using annual data on 42 Sub-Saharan African countries between 1960-96. We find that the persistence of terms of trade shocks varies widelyfor about half the countries such shocks are short-lived, while for one-third of the countries such shocks are long-lived. The countries experiencing long-lived terms of trade shocks are typically those that have large shares of petroleum imports in total imports, small shares of nonfuel commodity exports in total exports, and are highly concentrated in exportable commodities with long-lived price shocks.

Keywords: Terms of Trade Shock Persistence Sub-Saharan Africa

JEL Classification: C22 F41 013 Q17