Terms of Trade Instability and Output Growth in Bolivia

Abstract

This study examines the empirical hypothesis that there is a negative relationship between terms of trade instability and output growth. The instability in the terms of trade is measured by the price variance of three export commodities for Bolivia. Results confirm the hypothesis that terms of trade instability and output growth have an inverse relationship. Since the terms of trade affect the value of tradable components of output, fluctuations in the terms of trade caused by exports price instability are likely to lead to fluctuations in output. JEL Classifications: O10; O40

An Overview of Afghanistan's Major Goods Imports From 2011 to 2020

“…The findings of Cheong et al (2005) imply that exporters react to the change in the amount of risk when there is an unanticipated shift in exchange rates by raising export prices and lowering trade volumes, but prefer to do it directly rather than by raising prices. That's because the terms of trade have an impact on the value of the output's marketable components, and changes in the terms of trade brought on by export price volatility are likely to produce changes in production (Toledo, 2014). It has been proposed that the nominal trade account's dynamic reaction to fluctuations in the value of the US dollar exhibits a J-curve pattern (Koch & Rosensweig, 1990).…”