Journal
JOURNAL OF INTERNATIONAL ECONOMICS
Volume 50, Issue 1, Pages 185-213Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/S0022-1996(98)00064-6
Keywords
oil; productivity; terms of trade; real exchange rates; international transmission of business cycles
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The combination of substantial terms of trade variability and unstable correlation patterns of trade prices with output and trade volumes has led some to suggest a break in the link between trade volumes and prices. We find that oil accounts for much of the variation in the terms of trade over the last twenty five years and its quantitative role varies significantly over time. And since our dynamic general equilibrium model predicts that the economy responds differently to oil supply shocks than to other shocks, changes in their relative importance helps to account for the unstable correlations in the data. (C) 2000 Elsevier Science B.V. All rights reserved.
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