Terms-of-trade shocks and optimal investment: another look at the Laursen-Metzler effect

Servén, Luis

doi:10.1016/s0261-5606(99)85001-3

Cited by 35 publications

(20 citation statements)

References 31 publications

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“…Dollars movements had ambiguous effects on nonmanufacturing industries, and its depreciations (appreciations) decreased (increased) investment in manufacturing nondurables sectors. Campa and Goldberg (1995, 1997, 1999 analyse how the exchange rate could affect the investment and pricing behaviour of manufacturing firms in the United States, Canada, Japan and the United Kingdom. They use a model of investment with adjustment costs that takes into account export sales and the use of imported inputs in production, both of which expose producers to exchange rate movements.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Volatile real exchange rates are associated with erratic swings in the relative profitability of investment in the traded and nontraded goods sectors of the economy. In turn, the cost of new capital goods also becomes uncertain with real exchange rate volatility, due to the high import content of investment in developing countries (Serven, 1999). This article is organized as follows.…”

Section: Introductionmentioning

confidence: 99%

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The impact of output and exchange rate volatility on fixed private investment: evidence from selected G7 countries

Chowdhury

Wheeler

2015

Applied Economics

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This study examines the impact of shocks to exchange rate and output uncertainty (volatility) on real private fixed investment (FI) in Canada, Germany, the United Kingdom and the United States. The analysis is conducted using vector autoregressive models that contain the price level, real output, the volatility of real output, the real exchange rate, the volatility of the real exchange rate, an interest rate and FI. The results yield important public policy implications with regard to the impact of output volatility of FI. Our analysis indicates that volatility shocks, measured as output volatility or exchange rate volatility, do not have a significant impact on FI for any country in our study.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The impact of output and exchange rate volatility on fixed private investment: evidence from selected G7 countries

Chowdhury

Wheeler

2015

Applied Economics

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“…Conversely, if one assumes that investment decisions are irreversible, such irreversibility of investments may induce firms to postpone their capital expenditures for the current period, due to the enhanced value of the firm or even higher adjustment cost (Pindyck 1991;Dixit and Pindyck 1994). Greenwald et al (1984), Craine (1989), and Serven (1998) have argued that risk aversion, credit rationing, imperfect competition, and/or decreasing returns to scale explain the negative link between uncertainty and investment.…”

Section: Theoretical Reviewmentioning

confidence: 99%

Exchange rate uncertainty and private investment in BRICS economies

Ruzima

Boachie

2017

Asia-Pac J Reg Sci

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Macroeconomic uncertainty is a major challenge facing policymakers. Exchange rate is usually associated with high level of volatility in developing economies. This has potential effect on other economic variables such as investment. This paper empirically examines the impact of exchange rate uncertainty on private investment in the BRICS bloc. Using cross-country time series data from World Development Indicators, for 1997-2015, we built an ARCH-based measure of exchange rate volatility to proxy uncertainty. The results show that uncertainty resulting from exchange rate volatility has a negative effect on private investment in both random and fixed effects as well as GMM estimations. Therefore, policy may focus on stabilizing domestic currencies in BRICS countries.

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“…Böylece gelir düzeyinde de bir değiĢim olacaktır. Ancak bu değiĢimin hangi yönde olacağı belirsizdir (Persson ve Svensson 1985;Matsuyama 1988;Sen ve Turnovsky 1989;Kent 1997;Servén 1999). Bu konuda Svensson ve Razin (1983) yaklaĢımı önemli bilgi sağlamaktadır.…”

Section: Li̇teratür Taramasiunclassified

The Relationship of Terms of Trade and Economic Growth: The Turkish Case

Eki̇nci̇¹,

Tüzün²,

Kahyaoğlu³

2015

OJEMS

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ÖZBu çalıĢmanın amacı dıĢ ticaret hadlerinin ekonomik büyüme üzerindeki etkisini analiz etmektir. Bu çalıĢmanın teorik temeli Harberger-Laursen-Metzler (HLM) ve Obstfeld-Razin-Svensson (ORS) etkisi yaklaĢımlarına dayanmaktadır. HLM yaklaĢımı dıĢ ticaret hadlerindeki bir kötüleĢmenin ülkenin dıĢ ticaret açıkları üzerinde olumlu bir etkiye yol açacağını belirtmekte, bu olumlu geliĢmenin ülkenin ekonomik büyümesi üzerinde yaratacağı etkiye bağlı olarak da dıĢ ticaret açıklarında bir artıĢa neden olacağı yönünde bilgi sunmaktadır. Bu yaklaĢım literatürde S Eğrisi olarak bilinmektedir. ORS yaklaĢımı ise dıĢ ticaret hadlerindeki bir Ģokun devamlılığı yönündeki algıya bağlı olarak dıĢ ticaret hadlerindeki geliĢmelerin ekonomik büyüme üzerinde etkili olacağını belirtmektedir.Bu kapsamda dıĢ ticaret hadlerinin ekonomik büyüme üzerindeki pozitif ve negatif etkisi Markov DeğiĢim Tekniği yaklaĢımıyla incelenmektedir. Analizde ekonomik büyümenin göstergesi olarak imalat sanayi üretim endeksi, rejim veya geçiĢ değiĢkeni olarak da dıĢ ticaret hadleri kullanılmıĢtır. ÇalıĢmanın bulgularına göre dıĢa açık ekonomik büyüme stratejisi dıĢ ticaret hadlerinin ülke lehine olmasına bağlıdır. The Relationship of Terms of Trade and Economic Growth: The Turkish Case ABSTRACTThis paper aims to analyze the influence of foreign trade sizes on economic growth. Theoretical framework of this study rests on Harberger-Laursen-Metzler (HLM) and Obstfeld-Razin-Svensson (ORS) effect approaches. Approach of HLM indicates that any setback in foreign trade size of a country causes a favorable effect on foreign trade deficit of that country. In accordance with improved growth rates generated by this positive effect HLM approach also provides information towards an increase of foreign trade deficits. This approach is known as S-Curve in academic literature. ORS approach on the other hand, opposes that improvements in foreign trade sizes become effective on economic growth with perceptions related with continuity of shock happening to foreign trade sizes.With this context, positive and negative effects of foreign trade sizes on economic growth are examined via Markov Variation technique. In the analysis, manufacturing industry production index is taken as indicator of economic growth whereas foreign trade sizes are taken as regimen or transitional parameter. With findings of this study, outward-oriented growth strategy depends on the terms of trade are in favor of the country.

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Terms-of-trade shocks and optimal investment: another look at the Laursen-Metzler effect

Cited by 35 publications

References 31 publications

The impact of output and exchange rate volatility on fixed private investment: evidence from selected G7 countries

The impact of output and exchange rate volatility on fixed private investment: evidence from selected G7 countries

Exchange rate uncertainty and private investment in BRICS economies

The Relationship of Terms of Trade and Economic Growth: The Turkish Case

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