The Importance of Commodity Terms of Trade Volatility

The world has experienced in recent years a rising anti-trade and anti-globalization sentiment, which would likely jeopardize recent efforts by the international trade community, in particular Members of the World Trade Organization (WTO), to promote multilateral trade liberalization (MTP). The current article investigates the impact of MTP on countries’ terms of trade volatility. Results based on a large panel dataset suggest that MTP exerts a significant reducing effect on countries’ terms of trade volatility. However, this impact appears to be dependent on countries’ development level. The take-home message is that greater cooperation on trade matters, including among WTO Members would help promote multilateral trade liberalization, which would surely contribute to reducing terms of trade volatility, for the benefits of all countries, in particular developing economies.

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Latent Trade Diversification and Its Relevance for Macroeconomic Stability

The World Bank Economic Review ◽

10.1093/wber/lhz019 ◽

2019 ◽

Author(s):

Daniel Lederman ◽

Samuel Pienknagura ◽

Diego Rojas

Keyword(s):

Important Determinant ◽

Terms Of Trade ◽

Gdp Per Capita ◽

Economic Implications ◽

Country Characteristics ◽

Per Capita ◽

Terms Of Trade Volatility ◽

Trade Volatility ◽

Novel Concept ◽

Macroeconomic Stability

Abstract This paper examines the economic implications of a novel concept of trade diversification—latent diversification. In contrast to traditional measures, latent diversification accounts for potential movements of factors of production into activities where the country has previous exporting experience, hence presenting an additional margin through which countries can respond to shocks. The paper shows that the gap between traditional measures of diversification and latent diversification is sizeable and that latent diversification is in its own right an important determinant of macroeconomic stability. More diversified latent export baskets are associated with lower terms-of-trade volatility and, in turn, lower GDP per capita volatility, even after controlling for the degree of contemporaneous export diversification and other country characteristics.

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The Impact of Terms of Trade Volatility on Economic Growth in ASEAN Countries

East Asian Policy ◽

10.1142/s1793930518000259 ◽

2018 ◽

Vol 10 (03) ◽

pp. 32-40

Author(s):

Papa Kojo Christopher CONDUAH ◽

Tae Hwan YOO

Keyword(s):

Economic Growth ◽

Price Index ◽

Terms Of Trade ◽

Oil Price ◽

Raw Material ◽

Terms Of Trade Volatility ◽

Asean Countries ◽

Trade Volatility ◽

The Impact ◽

Material Price

This article examines the impact of terms of trade volatility on economic growth and the sources of terms of trade volatility for selected ASEAN countries. By adopting a panel cointegraion method, this study finds that fluctuations of oil price and non-fuel raw material price index have caused terms of trade volatility, which limits economic growth.

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