Relative Import Prices Research Articles

A HISTORICAL PERSPECTIVE OF TRADE LIBERALISATION DYNAMICS IN BANGLADESH: IMPACTS OF NATURAL CALAMITY RISK, GROSS DOMESTIC PRODUCT, FOREIGN EXCHANGE RESERVE, RELATIVE PRICE AND TARIFF ON IMPORT DEMAND

Purpose: After the trade liberation, Bangladesh has faced the crisis of trade imbalance. Therefore, trade liberation is considered as the driving force behind the crisis. To investigate this historical allegation, this study aims at analysing the factors that determined the post trade liberalisation aggregate import demand function of Bangladesh.
 
 Design/Methodology/Approach: Based on quarterly data from trade liberalisation period to reaching the economic stability period, 1992Q1 - 2007Q4, an autoregressive distributed lag (ARDL) approach to cointegration and an error correction model (ECM) have been utilised to estimate the impacts of natural calamity, gross domestic product, foreign exchange reserve, relative price and tariff on aggregate import demand of Bangladesh.
 Findings: Empirical results revealed that the natural calamity is identified to be nonresponsive to the nation's aggregate import demand both in the short and long run. This indicates that Bangladesh can meet the natural crisis related demand by herself without influencing its aggregate import demand. Results also revealed that the import volume of Bangladesh is cointegrated with relative import price, actual GDP and real foreign exchange reserve of the country. The import demand of the country can largely be described by its real GDP, while it is found inversely associated with relative price ratio in the long run. The long run association among import demand and tariff rate indicates that trade liberalisation has a significant positive impact on the country's aggregate import demand, as well as real foreign exchange reserve, as explained by the reduction in tariff rate.
 
 Research Implication: Developing countries like Bangladesh and the relevant business stakeholders would have considerable implications of such empirical findings with their trade policies, particularly how they should respond to unpredictable scenarios caused by the factors such as natural calamity, foreign exchange reserve, tariff, etc.
 
 Originality Value: The originality of the study lies in its uniqueness in using the historical data and factors that no studies have so far used in analysing the import demand function of Bangladesh.
 
 Keywords: Natural calamity, import demand, foreign exchange reserve, gross domestic product, tariff, trade liberalisation, Bangladesh.
 
 Cite as: Shikha, H. A., Alam, M. M., Murad, M. W., Said, J., & Ahmed, Z. U. (2023). A historical perspective of trade liberalisation dynamics in Bangladesh: impacts of natural calamity risk, gross domestic product, foreign exchange reserve, relative price and tariff on import demand. Journal of Nusantara Studies, 8(TI), 177-208. http://dx.doi.org/10.24200/jonus.vol8issTIpp177-208

Unlocking Factors Driving Import Demand in ECOWAS Countries: Evidence from a Heterogeneous Panel ARDL Analysis

This study examines the factors determining the demand for imports of the member countries of the Economic Community of West African States (ECOWAS) over the period from 1980 to 2017. As a modelling strategy, we employ the Common Correlated Effect Mean Group (CCEMG) estimator that accounts for both heterogeneity and cross-sectional dependence across countries. The study provides various pieces of evidence through whole-panel and country-level analyses. The results from the panel analysis indicate that income, relative price of imports, foreign direct investment and remittances are significant determinants of import demand in ECOWAS. Income, relative price and remittances have, on average, positive effect on import in the long run. In the short run, all explanatory variables are positively related to imports. Country-level results reveal, however, considerable heterogeneity across countries in the relationship between import demand and its determinants.

Assessment of the Determinants of Balance of Payment in Tanzania

The purpose of the study was to assess the determinants of the balance of payment in Tanzania. The nature of this study was quantitative where secondary time series data covering a period of thirty-one years between 1990 and 2020 were collected. The study performed descriptive statistics and diagnostic tests such as normality test, unit root test for stationarity, Pearson’s Correlation matrix to check if there is a multicollinearity problem in the data. The diagnostic tests revealed that the data bring unbiased results, therefore the ordinary least square regression was performed and we found that foreign direct investment and inflation rate have a negative and significant influence on the balance of payment, whereas exchange rate has a positive and insignificant influence on the balance of payment, and the interest rate has an insignificant negative influence on the balance of payment. Finally, we recommend that a country have to introduce relative prices of imports in order to improve the inflows of FDI in order to have a favourable balance of payment in a country like Tanzania. Also, Tanzania's central bank must be cautious in its monetary policy and take some beneficial steps to regulate the money supply. To attract the new internal investor, it must keep an eye on interest rates and charge a low-interest rate.

Logistics And Trade Flows In Selected Ecowas Countries: An Empirical Verification

This study investigates the role of logistics and its six components on trade flows in selected Economic Community of West Africa States (ECOWAS) countries. The impact of other macro-economic variables on trade flows was also investigated. Ten countries were selected in eight years period. We decomposed trade flows into import and export trade. The World Bank Logistics performance index was used as a measure of logistics performance. The LPI has six components, and the impact of these components on trade flows were also examined. The fixed-effect model was used to explain the cross-country result that was obtained. The results showed that logistics has no significant impact on both Import and export, thus logistics play no role on trade flows among the selected ECOWAS countries. The components of logistics except Timeliness of shipments in reaching the final destination ( CRC ),have no impact on trade flows. Income was found to be positively related to imports. Exchange rate, consumption and money supply, reserve and tariff have no significant impact on imports. Relative import price has an inverse and significant relationship with imports. GDP has a positive and significant impact on export trade. The study also found FDI, savings, exchange rate and labour to have insignificant impact on exports. Finally, we found that logistics is not a driver of trade among the selected ECOWAS countries. The study recommended the introduction of the single window system and improvement in border management in order to reduce the cost associated with Logistics and thereby enhance trade.

The role of exchange rate and relative import price on sawnwood import demand in Africa: Evidence from modified heterogeneous panel data methods

This study investigates the role of exchange rate and relative import price in sawnwood import demand in a panel of 30 African countries during 1985–2016 using the modified heterogeneous panel data techniques and the modified dynamic common correlated effect method. In the sawnwood import demand modelling and analysis, we controlled for the effects of structural changes and common shocks arising from increased economic and financial integration among countries which may affect our findings. Based on alternative estimators, the regression results reveal that real domestic income, real effective exchange rate, sawnwood relative import price and external reserves are significant determinants of sawnwood import demand in the long-run. The results show that the sawnwood import demand was fairly income inelastic, but, highly inelastic to changes in real effective exchange rate, real external reserves and relative sawnwood import price. Also, real effective exchange rate and sawnwood relative import price engender asymmetric impact on sawnwood import demand in Africa. A disaggregate analysis reveals variations of asymmetric impacts across countries. Some policy implications are drawn for managing the balance of payments problem and pollution associated with sawnwood consumption and for industrialization and social welfare.

An Empirical Analysis on Japanese Import Demand Function in Comparison with Korea’s Import Demand

Purpose - This study presents an empirical examination of Japan’s short-run and long-run aggregate demand for imports, compared with the study on Korea’s import, using quarterly economic data for the period 2000-2020 including aggregate imports, final consumption expenditure components, investment and relative price of imports. Design/Methodology/Approach - This paper has employed multivariate co-integration procedure and the short-run error correction model to find the existence of a cointegration and the relationship among variables in import demand function. Findings - This paper shows that the variables are all cointegrated and there exist significant differences with reference to different factors of final expenditure. Partial elasticities with respect to government expenditure, investment, exports and import prices are reported to be positive while imports seem to move negatively to changes in private consumption, in contrast to the case of Korea which shows that imports only move negatively with respect to investment. Export appears to indicate a relatively insignificant impact on Japan’s aggregate imports in the long run. However, an vector error correction model demonstrates that only exports have an influence on the imports in the short run while, in Korea, the current period changes in the demand for imports are related only to the previous period changes in relative price of imports. Research Implications - This paper provides significant implications for policy makers in a nation seeking to improve the country’s trade balances. Exchange rate policies in Japan appear to have significant long-term impact on Japan’s import demand, but no significant effect in the short term. Policies to increase the private sector consumption could be of a crucial importance in decreasing aggregate imports in the long term, resulting in further improvement in Japan’s balance of trade. In contrast to Japan, the exchange rate scheme has a short-term effect on Korea’s demand for imports but not a long-term impact on the country’s imports while investment component plays a key role in reducing imports in the long run, leading to enhancement in the Korea’s balance of trade.

Trade Protection, Stock-Market Returns, and Welfare

We show that the specific factors model can be used to derive a rigorous link between movements in stock prices and productivity, wages, employment, output, and welfare. We also prove that the commonly used measure of the effective rate of protection equals the dual measure of revenue TFP, providing a theoretical foundation for why many studies have found that trade liberalization significantly increases firm-level productivity. Our method enables us to trace a tariff announcement's effect on TFP through its impact on macro variables (e.g., exchange rates) and through its effect on the relative prices of imports. We apply this framework to understanding the implications of the U.S.-China trade war. Our results show that the trade-war announcements caused large declines in U.S. stock prices, expected TFP, and expected inflation largely by moving macro variables, but also by causing declines in the returns of firms trading with China. We find that markets expect the trade war to lower U.S. welfare by 7.8 percentage points, which is much larger than the predictions of static models but in line with those of dynamic models. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Empirical Analysis of Demand for Imports in Sub-Saharan Africa

ABSTRACT This article investigates the drivers of demand for imports of goods and services in a panel of 32 sub-Saharan African countries over the 1990 to 2016 period with the aid of an imperfect substitute model of import demand and the dynamic system-GMM technique. For comparison purposes, three separate models are estimated: imports of goods and services, imports of goods, and imports of services. The article finds that expenditure components, relative import prices, and foreign exchange reserves are the key drivers of import demand in sub-Saharan Africa. The findings and policy suggestions of the study provide relevant information for policy formulation.

Reconsidering the import demand function of China: evidence from asymmetric cointegration

This paper examines the association among the quantity of imports expressed in real terms, relative import prices, exchange rate volatility, foreign exchange reserves and real GDP in the aggregate import demand function for China during the period 2000Q1–2015Q4. The nonlinear autoregressive distributed lag model was applied to test for the long-run association among the variables and also to explore the short-run dynamics. The study obtains a long-run cointegrating association between the variables. An increase in income of China by 10% leads to the rise in imports by 6.7%, again a fall in the income level by 10% leads to the drop in the import demand by 39%. The impact of exchange rate volatility is rather mixed, a phase of rising fluctuations generates a decline in the imports by 21%; however, when the fluctuations are diminishing imports are not impacted significantly. The study lends support to the hypothesis that volatility of the exchange rates discourages imports. The study further shows that foreign exchange reserves do not impact imports in China. Such investigation will be important in making policy decisions related to trade and balance of payments in China.

Reconsidering the import demand function of China: evidence from asymmetric cointegration

This paper examines the association among the quantity of imports expressed in real terms, relative import prices, exchange rate volatility, foreign exchange reserves and real GDP in the aggregate import demand function for China during the period 2000Q1–2015Q4. The nonlinear autoregressive distributed lag model was applied to test for the long-run association among the variables and also to explore the short-run dynamics. The study obtains a long-run cointegrating association between the variables. An increase in income of China by 10% leads to the rise in imports by 6.7%, again a fall in the income level by 10% leads to the drop in the import demand by 39%. The impact of exchange rate volatility is rather mixed, a phase of rising fluctuations generates a decline in the imports by 21%; however, when the fluctuations are diminishing imports are not impacted significantly. The study lends support to the hypothesis that volatility of the exchange rates discourages imports. The study further shows that foreign exchange reserves do not impact imports in China. Such investigation will be important in making policy decisions related to trade and balance of payments in China.

The determinants of aggregate and dis-aggregated import demand in Ghana

PurposeThe purpose of this paper is to examine the determinants of aggregate and dis-aggregated import demand for Ghana for the period from 1985 to 2015.Design/methodology/approachThe study employed the autoregressive distributed lag bounds testing approach.FindingsThe long-run finding show that aggregate import demand (AIMD) is positively determined by exports of goods and services and consumer spending, but negatively determined by foreign exchange reserves. It is found that consumer spending is the key positive determinant of the import demand of consumer goods, while foreign exchange reserves, trade liberalisation policy and relative import price are negative determinants. It is found that import demand of intermediate goods is positively determined by consumer spending, government spending and investment spending. The long-run findings further confirm that import demand of capital goods is negatively determined by relative import price. In the short run, the findings suggest that AIMD is positively affected by exports of goods and services, investment spending and consumer spending, but negatively affected by foreign exchange reserves. Import demand of consumer goods is positively influenced by consumer spending, but negatively determined by relative import price. Finally, import demand for intermediate goods is found to be positively determined by investment spending and government spending, while import demand for capital goods is positively associated with exports of goods and services and trade liberalisation policy in the previous period.Originality/valueA number of studies have looked at the determinants of import demand, focussing on the aggregated import demand. This study adds the component of dis-aggregated import demand, as it assist in dealing with the issues of bias.

Comment on “United Nations Sanctions on North Korea's Luxury Goods Imports: Impact and Implications”

Jeong (2019) investigates the effectiveness of the United Nations Security Council's (UNSC) economic sanctions against North Korea, focusing on the embargo of luxury goods exports into North Korea from 2006 onward. Jeong's interest is especially on the effects of Resolution 1718 adopted by the UNSC on October 14, 2006. Resolution 1718 requires all UN member states to prevent the supply of luxury goods to North Korea; however, it provided no detailed definition of what constituted “luxury goods” and left the decision on whether and how to actually implement the embargo on luxury goods to individual member states. Although such features of Resolution 1718 pose a challenge to Jeong in evaluating the impact of UN sanctions on North Korea's imports of luxury goods, Jeong augments the gravity model, which is the workhorse of empirical international trade, by adding a binary dummy variable that takes the value of one in 2006 and beyond and another binary dummy variable indicating the UN member states that submitted an embargo implementation plan to the UNSC. Jeong also includes an interaction term of these two dummies and effectively uses the difference-in-difference method. He concludes that the Resolution 1718’s embargo was ineffective in decreasing North Korea's luxury goods imports though the estimation results for the interaction term of interest indicate some weak evidence that the sanctions were effective for the imports originating from those countries that (seem to) actually implement the embargo. The contribution of Jeong (2019), which presents empirical facts as to whether UN sanctions are really reducing North Korea's luxury goods imports, is appreciated, but its analytical framework seems to have room for improvement and extension. First and foremost, we should be aware of the fact that the Resolution 1718 embargo substantially takes the form of a unilateral (or preferential) rather than a multilateral (or common) export prohibition. There were likely to be substitutes for the exports of certain luxury goods banned by unilateral export prohibitions. That is, trade diversion and termination effects would arise due to the unilateral export prohibitions. To capture the real (direct) impact of the Resolution 1718 embargo, Jeong could follow the ex-post empirical studies that differentiate the trade creation and diversion effects of regional trade agreements (RTA) (e.g. Magee, 2008). If Jeong could detect trade diversion effects more than offsetting the trade termination effects, then he would argue that international cooperation in achieving multilateral export prohibitions against a target country is necessary to bring about greater negative impacts on the target country's imports. By doing so, Jeong could also strengthen his argument that China recently replaced other major countries exporting luxury goods to North Korea. Second, to look into the trade termination and diversion effects of the Resolution 1718 embargo, Jeong could conduct product-level analysis instead of employing aggregate trade data at the country level, because there exists a list of finely disaggregated product codes for the luxury goods that were banned by the USA. Using product-level bilateral trade data would enable us to analyze with which particular trading partner and for which particular product code the termination of trade relationships actually occurs (as the counterpart in the empirical RTA literature, e.g. Urata & Okabe, 2014). Furthermore, Jeong could build on the empirical literature on the extensive and intensive margins of trade to examine whether and to what extent the trade termination is accompanied by the trade diversion (as the RTA counterpart, e.g. Debaere & Mostashari, 2010). Finally, from a broader perspective, Jeong could relate his findings in the case of Resolution 1718 embargo to the literature on the economic effects of unilateral and multilateral trade sanctions. As surveyed in Kaempfer and Lowenberg (2007), we can use offer curves to study the effects of trade sanctions on relative prices of exports and imports, that is, the terms of trade, and make inferences about the welfare effects of trade sanctions. The simple textbook analysis using offer curves shows that unilateral trade sanctions create a smaller deterioration in the target's terms of trade than do trade sanctions involving a larger number of participant countries (multilateral in an extreme case). It would be interesting if Jeong could elaborate on the offer curve analysis by incorporating features of the luxury goods exports into North Korea (e.g. trade elasticities) to derive a theoretical implication that could then be confirmed with data.

International Trade and Productivity Growth in Indian Industry: Evidence from the Organized Manufacturing Sector

The present study attempts to examine the impact of international trade on manufacturing productivity in India through the effects of economies of scale, reallocation, competition and spillover channels. To study the net impact of these effects, we constructed trade-related variables such as relative import price, import penetration and export intensity for a panel of 17 two-digit organized manufacturing sector industries from 1980 to 2013. During this period, the manufacturing sector witnessed considerable liberalization and openness coupled with an increase in manufacturing growth and productivity, especially in the recent decades. The panel econometric estimation based on random effect modelling reveals that the productivity-enhancing effects of economies of scale, reallocation and spillover largely operate through imports and become prominent after 1–2-year lag. In the short period, there is some evidence of dominance of negative economies of scale induced by import competition. Although we find a positive association between exports and productivity during all selected periods, the relationship is found to be statistically significant only in the current period. Overall, the trade linked productivity gains is channelled through imports, which persist over time. This reveals that the impact of trade on manufacturing productivity in India is not static but dynamic in nature.

Demand for Imports and Components of Final Expenditure: An Empirical Study with Special Reference to the Korean Import Demand Function

This paper presents a detailed empirical investigation of Korea’s demand for imports. In particular, our study provides fresh estimates of partial elasticities of demand for imports with respect to each key component of final expenditure including final consumption expenditure, and expenditure on capital formation. A Johansen multivariate co-integration analysis is employed on the post-global financial crisis quarterly macroeconomic data such as final consumption, gross fixed capital formation, exports and relative import prices for the sample period 2009-2018. In support of the empirical framework used in this study, we have found significant differences to exist between various long-run partial elasticities of demand for imports while import elasticity of demand with respect to expenditure on fixed capital formation is found to be negative. This latter result appears to imply that incremental increases in capital formation can provide an effective mechanism for reducing reliance of Korea on imports in the long run. According to the short-run forecasting model, we have found that the current period changes in the demand for imports are related only to the previous period changes in relative price of imports.

ESTIMATION OF DEMAND FUNCTIONS FOR EGYPTIAN EXPORTS OF GRAPES USING THE MARKET PARTICIPATION MODEL

The main objective of this research is to try to improve thecompetitiveness and increase export efficiency of Egyptian grapes exportsduring the period (0222-0248). To achieve this objective, the following subobjectives were studied: 4- Studying the relative importance of grape exportsfor fruit exports, agricultural exports, 0 - The study of the development of thequantity, value and export prices of grape exports, 5 - Measuring the indicatorsof the export efficiency of Egyptian exports of grapes, (Efficiency of theperformance of export operations - The degree of economic openness - Thecoefficient of comparative advantage phenomenon - Instability coefficient -Gini coefficient of quantity and value of exports to (1) Estimating the externaldemand for Egyptian grape exports using the market participation model. Theresearch relied on the published and unpublished secondary data issued by theCentral Agency for Public Mobilization and Statistics, the computer databaseof the system, Agriculture, the Food and Agriculture Organization of theUnited Nations (FAO), foreign trade publications, and some previous studiesin this field. To achieve the objectives of the research, statistical, economicand statistical methods of analysis were used by estimating general trendpatterns Linear model for each of the cultivated area, production andproductivity, quantity and value and export prices, and adopted economicanalysis at the expense of some indicators which the most important of theinstability coefficient, the calculation of the concentration geographicalcoefficient (Gini) coefficient, was used as a form of market participation toestimate the demand for grape exports function.The main findings of the study were: The percentage of Egypt'sexports of grapes from fruit exports continued to rise. The relative importanceof this period reached about 402031. The lowest value of the relativeimportance in 0224 was 22091. The percentage of Egypt's exports of grapesfor agricultural exports increased continuously. The relative importance of thisperiod was about 12901. The relative importance of this year was 22081. Therelative importance in 0229 was 402811. Also, the percentage of Egypt'sexports of grapes for total exports in Irvine The relative importance of thisperiod was about 2191. The lowest value for the relative importance in 0224was 22251 and the relative importance of 0248 was 424981. The estimation ofexport efficiency indicators for grapes during the study period shows that thedegree of economic openness The efficiency of export operations for grapeswas estimated at 22231 for the average period, and the maximum efficiency rate in 0228 was estimated at about 2242821, while the percentage of thegrapes was 2228791 for the average period, reaching a maximum of 2204901in 0228, While the lowest rate of efficiency in 0222 was estimated at about2222401, and it turned out that Mato The coefficient of competitiveness ofEgyptian exports of grapes during the study period was 1245 and its valueranged between a minimum of 0241 in 0240 and a maximum of 0248 in 0248.The results of the estimation of the demand function using the marketparticipation model showed that the value of the regression coefficient Theestimated model for the State of Kuwait and Italy of the UAE was -42425, -22491, -22405. This confirms an inverse relationship between the relative priceof imports and the market share of grapes. This is consistent with theeconomic theory. The price elasticity of the same countries is -2254, -2241,2248 (Inelastic demand), ie, the higher the relative price of exports, the lowerthe In the market share of grape exports. This means that there is a possibilityof increasing the export price of Kuwait, Italy and the UAE, thus increasingthe export yield of grapes, while the results in the same table showed that theregression coefficient in the estimated model for the UK and Belgium was22421, 22103 This confirms the existence of a positive relationship betweenthe relative price of imports and the market share of grapes, which may be dueto the non-saturation of the markets of the grapes and the increase in domesticdemand

A Comparative Study of the Role of China and India in Sustainable Textile Competition in the U.S. Market under Green Trade Barriers

The United States is the most important textile import market in the world, and one of the most important export targets of developing countries. In view of its ecological environment and consumer health, the United States has put forward increasingly harsh environmental protection systems and standards for imported textile products, and its environmental trade barriers have been steadily strengthened. China’s textile exports increased substantially after joining the World Trade Organization (WTO) in 2000; at present, the textile imports of the United States from China and India reach in total more than one third of all their imports. China and India both have comparative advantages in the import trade of textile raw materials and clothing in the United States (U.S.). On the basis of the United Nation ComTrade Rev. 3, this paper studies the role of China and India in the United States textile market, including calculating the trade competitiveness index, revealing the competitive advantages of China and India, and investigating the impact of both Chinese and Indian textiles on United States imports from the rest of the world across three main textile sectors in the period 2000–2016, especially in the context of green trade barriers. We find that the relative textile import prices, the ecological standard of China’s textile production re-edited Oeko-Tex Standard 100 in 2008 and export tax policy, and the competitive advantages of China and India had varied impacts on relative U.S. textile imports across related sectors under green environmental trade barriers. These findings recognize China’s competitiveness in international trading, and also provide suggestions regarding China’s competitiveness and sustainable development in the U.S. market.

Trade Collapses and Trade Slowdowns: Evidence from Some Central and Eastern European Countries

World trade suddenly plummeted in the last quarter of 2008 after the bankruptcy of Lehman brothers and the subsequent meltdown in financial markets. Even if the following recovery was impressive, trade growth is now noticeably below trend. The anaemic momentum in global export volume questions whether the financial crisis has permanently changed the trade landscape. In this paper, we address trade elasticities in some Central and Eastern European economies by estimating a standard import function equation. We employ a dynamic panel Auto Regressive Distributed Lag model with the Common Correlated Effects Mean Group estimator to cope with cross-sectional dependence. The model is fit on a sample of eight countries over the period 1995:q1–2017:q1. First, we estimate long-run import elasticities with respect to GDP and the relative import price. Then, we discriminate between booms and slowdowns. Results confirm imports respond differently over the business cycle.

An Empirical Analysis of Aggregate Import Demand Function for India

This paper examines the behaviour of Indian aggregate imports during the period 1980–81 to 2013–14. The stability of aggregate import demand function is examined using five types of cointegration tests including the ARDL bounds test. In order to estimate the long-run elasticities, we have applied three alternative fully efficient cointegrating regressions, autoregressive distributed lag (ARDL) model and Johansen maximum likelihood method. Our results reveal cointegration relationship between import demand, relative prices of import, domestic activity and foreign exchange reserves. Results evince that, in the long-run, the response of import demand to relative import prices is negative and less than unity, whereas it’s response to domestic activity/income is positive and more than unity. The foreign exchange reserve has a positive effect on imports.

Tradable and non-tradable expenditure and aggregate demand for imports in an emerging market economy

Using an assumption of non-separability of non-tradable expenditure from imports, this paper examines the impact of the structural transformation undertaken after 2001 on imports and, in turn, the current account stance of Turkey. In this regard, an import demand function is derived under the assumption of non-separability, and is estimated using quarterly time series data from Turkey. The empirical results show that the assumption of non-separability cannot be rejected in the case of Turkey and the relative prices of non-tradable and tradable goods must be among the determinants of import demand in addition to the relative price of imports and real GDP. This result accordingly implies that recent increases in import expenditure are, to some extent, due to changes in the relative price structure in favour of non-tradable goods.

What Do We (and Others) Mean by “The Terms of Trade”?

Abstract. I explore how the concept of “the terms of trade” has been used since Alfred Marshall coined it. Early writers (Taussig, Viner, Dorrance) constructed variations on the relative price of traded goods that Marshall was concerned with, but most of these variations have been left behind in modern uses of the term, which today almost always refer to a relative price of exports and imports. However, when authors have wanted to identify the terms of trade with a particular country and to represent it either symbolically in an economic model or empirically, they have had to choose between defining the terms of trade as the relative price of exports or the relative price of imports. The first to do this was Taussig, who chose the second option, but he was followed by Viner who chose the first, and Viner was followed in this choice by almost all writers for the next several decades. Then, around 1980, Taussig’s choice came back into fashion among scholars of international finance. I document this contrast in definitions between international trade and international finance, then add slightly to Viner’s argument for preferring that the terms of trade of a country be defined as the relative price of its exports. Keywords. Terms of trade. JEL. F10.