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Tuesday, October 13, 2020 | History

2 edition of Terms-of-trade shocks and optimal investment found in the catalog.

Terms-of-trade shocks and optimal investment

Luis Serven

Terms-of-trade shocks and optimal investment

another look at the Laursen-Metzler effect

by Luis Serven

  • 160 Want to read
  • 27 Currently reading

Published by The World Bank, Policy Research Dept., Macroeonomics and Growth Division in Washington, D.C .
Written in English

    Subjects:
  • Capital investments -- Mathematical models.,
  • Terms of trade -- Mathematical models.

  • Edition Notes

    StatementLuis Serven.
    SeriesPolicy research working paper ;, 1424, Policy research working papers ;, 1424.
    ContributionsWorld Bank. Macroeconomics and Growth Division.
    Classifications
    LC ClassificationsHG3881.5.W57 P63 no. 1424
    The Physical Object
    Pagination26, [3] p. :
    Number of Pages26
    ID Numbers
    Open LibraryOL869632M
    LC Control Number95154553
    OCLC/WorldCa32319593

      This book was written in and has been hailed by Warren Buffett as the best investing book ever written.   Benjamin Graham is considered the "father of Author: Marvin Dumont.   This chapter assesses the net effects of the concurrence of negative terms-of-trade and oil price shocks on inflation, and the response of the policy rate. Evidence is presented to show that the adjustment of the trade balance to positive terms-of-trade shocks is consistent with the Harberger-Laursen-Metzler (HLM) : Eliphas Ndou, Nombulelo Gumata.

    The terms of trade are subject to favourable/unfavourable and permanent/temporal shocks. There is an ongoing debate that leaving these shocks unidentified could lead to more of macroeconomic. wisdom. Instead, we argue that terms of trade shocks resemble wealth shocks more than pro-ductivity shocks, and demonstrate a channel through which this occurs: nominal exchange rate exposure in countries’ international asset positions. First, we examine the e ects of country-speci c terms of trade shocks on a variety of macroe-.

      This column examines how important these terms-of-trade shocks are in explaining GDP fluctuations. Using structural vector autoregression analysis, it shows that terms-of-trade shocks account for no more than 10% of business-cycle fluctuations in the majority of . effect are no longer well defined when relating changes in the terms of trade gregates to export and import prices (terms of trade) means that cause and experiment, in which one varies [the terms of trade (or New Zealand’s export Level Annual % 40 30 20 10 0 Growth rate (RHS) Ratio.


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Terms-of-trade shocks and optimal investment by Luis Serven Download PDF EPUB FB2

This inverse relationship between the stocks of capital and foreign assets along the adjustment path is captured by the downward-sloping AA line in the bottom panel of Fig.

Terms-of-trade shocks A permanent terms-of-trade improvement The consequences of a permanent terms-of-trade shock in this model can be easily by: Terms-of-trade shocks and optimal investment: another look at the Laursen-Metzler effect (English) Conventional analyses of the effect of terms-of-trade shocks provide a misleading view of their impact on investment and the current account, because capital goods imports are Cited by: CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): This paper -- a product of the Macroeconomics and Growth Division, Policy Research Department -- is part of a larger effort in the de partanent to understand the macroeconomic impact of policy shifts and cxtzrnal shocks.

In this framework, the responses to a permanent terms of trade improvement in unambiguous: the long-run capital stock, and thus investment, must rise, and the current account must deteriorate -- exactly the opposite of the Laursen-Metzler effect.

A transitory improvement in the terms of trade raises saving but has an uncertaineffect on investment. Conventional analyses of the effect of terms-of-trade shocks provide a misleading view of their impact on investment and the current account, because capital goods imports are excluded from the analytical framework.

The author argues that such an exclusion is both arbitrary and unrealistic. Conventional analyses of the effect of terms-of-trade shocks provide a misleading view of their impact on investment and the current account due to the exclusion of capital goods imports from the analytical framework - a feature that is both arbitrary and unrealistic.

Conventional analyses of the effect of terms-of-trade shocks provide a misleading view of their impact on investment and the current account, because capital goods imports are excluded from the analytical framework.

The author argues that such an exclusion is both arbitrary and : Luis Serven. Terms-of-Trade Shocks and Optimal Investment: Another Look at the Laursen-Metzler Effect is part of a larger effort in the de partanent to understand the macroeconomic impact of policy shifts and cxtzrnal shocks.

Copies of the paper are available free from the World Bank, H Street NW, Washington, DC Please contact Emily Khine Author: Luis Serven. terms of trade shocks could help improve income growth in the medium term if they help the economy to get rid of inefficient firms (Caballero and Hammour, ).

What the literature misses is that policy failure is often at the core of lower growth followingFile Size: KB. 2 Static Neoclassical Investment Theory Neoclassical investment theory dates mainly from Dale Jorgensen’s papers in the s (AER,Hall and Jorgenson, AER, ).

However, what Jorgenson delivered was more a theory of the optimal capital stock then a theory of optimal investment per se. Here is the essential setup:File Size: KB. This article describes and quantifies the macroeconomic effects of different types of terms of trade shocks and their propagation in the Australian economy.

Three types of shocks are identified based on their impact on commodity prices, global manufactured prices and global economic activity. The first two shocks, a world demand shock and a Cited by: terms-of-trade shocks by theoretical and SVAR models.

INTRODUCTION The conventional wisdom is that terms-of-trade shocks represent a major source of business cycles in emerging and poor countries. This view is largely based on the analysis of calibrated business-cycle models. Essentially, this result is obtained by first estimating a. Optimal Monetary Policy and Terms of Trade Shocks Sargam Guptay ISI Delhi Preliminary Version: Do not quote Septem Abstract This paper derives a micro-founded utility based welfare loss function for the multi-sector closed economy NK-DSGE model in.

Get this from a library. Terms-of-trade shocks and optimal investment: another look at the Laursen-Metzler effect. [Luis Serven; World Bank.

Macroeconomics and Growth Division.]. Terms of Trade Shocks and Investment in part by the government and in part by foreign agents, as well as a structural balance rule to describe fiscal policy in Chile.

International Macroeconomics Schmitt-Groh´e1 Uribe2 Woodford3 This draft: J The Current Account and the Net International Investment Position 20 Terms-of-Trade Shocks, Imperfect Information, and the Current Account of the terms of trade shock. Liu () also examines the effect of different types of international shocks on the Australian economy but like Dungey and Pagan (, ), Liu assumes that terms of trade shocks do not influence foreign variables.

In contrast, we maintain the small open economy assumption. A closer look at the results in columns 2 and 3 indicate that financial integration defined as foreign direct investment has no effect on real exchange rate volatility but dampens the effect of terms-of-trade shocks on real exchange rate volatility more substantially than financial integration defined as total portfolio investment (i.e., the Cited by: Trade shock analysis Measuring the impact of the global shocks on trade balances via price and The net sum of the first two components, (i) and (ii), will be called the terms-of-trade shock.

For. the only good can be used both for consumption and as capital (investment). Equation () describes capital accumulation: the output good, in the form of investment, is used to accumulate the capital input, and capital depreciates geometrically: a constant fraction – 2 [0;1] disintegrates every period.

Equation () is a behavioral equation. National Accounts, terms of trade shocks have no first-order effects if inputs of factors are constant. When real GDP is constructed using fixed base year prices, the effect of a terms of trade shock is ambiguous: in some cases a deterioration of the terms of trade can even increase real GDP!Terms of Trade Shocks and Fiscal Cycles Terms of Trade Shocks and Fiscal Cycles Graciela L Kaminsky1 Abstract The latest boom in commodity prices fuelled concerns about fiscal policies in commodity-exporting countries, with evidence suggesting that it triggered loose fiscal policy and left no funds for a rainy day.Positive Terms-of-Trade Shocks and Structural Adjustment in Sub-Saharan Africa Martin Brownbridge and Jane Harrigan* Recent research has developed and tested a theoretical framework for analysing the macro and micro economic effects of temporary positive external trade shocks in small open developing economies (Bevan et al., ).