Terms Of Trade Research Articles

Impact of External Shocks on Peru's Economic Growth, 2000-2021

Objective: To analyze the impact of China's GDP growth and an international oil price shock (external shocks) on Peru's growth rate, terms of trade, private investment, exports and unemployment for the period analyzed. Originality/Value: This study contributes to the literature on the dependence of a small economy on external factors, verifying through an econometric analysis the implications of an external shock that will be relevant for economic policy decision makers, academia and globalized economic culture. The relevance and value of this research are evidenced by quantifying the impacts of a large economy like China on variables such as terms of trade, private investment and Peru's GDP growth rate. Method: It is quantitative and exploratory with 4 variables, China's GDP growth rate, terms of trade, private investment and Peru's GDP growth rate; It is exploratory because it will give us an overview or knowledge of the behavior of China's GDP growth rate, terms of trade and private investment and their impact on Peru's growth rate from 2000 to 2021. The variables explained are: China's GDP growth rate (tCreChin), terms of trade (tInt), private investment (inv Priva). Explanatory variable: Peru's GDP growth rate (tCrePerú). The design is non-experimental of a correlational type, the population includes data from the 04 variables for the years 2000-2021, each with 22 observations that were extracted from the 21 years analyzed, extracted from institutional secondary sources BCRP and World Bank (WB). Subsequently, tests will be carried out to verify correlation, stationarity and heteroscedasticity in the variables and the estimation of the model parameters for several alternatives or possible combinations of factors. In each case, the “t” test, the “F” test will be performed and the coefficient of determination R2 will be calculated, to determine the best fit. And finally, the best model will be selected for forecasting purposes. Results: The response of GDP to a shock of the GDP variable of China has a positive impact from period 1-3, on the other hand the IT variable has a positive impact from period 1. Another relevant aspect achieved is that in 10 years, 51% of the variability of Peru's economic growth depends on the variability of China's growth, 2.20% of the variability of Peru's economic growth depends on the variability of the IT variance and 1.48% of the variability of Peru's economic growth depends on the variability of private investment. Discussion: Our results find similarity with studies by Guevara and Yamaca (2021) and Chávez (2020) et.al., since an external shock is positive and explains a high percentage of historical variability. A shock to China's GDP growth has a greater effect on Peru's GDP growth; and financial shocks reduce domestic GDP growth. On the other hand, Peruvian monetary policy is synchronized with the behavior of the American FED to mitigate the adverse effects of external factors. In our study we use a VAR demonstrating the influence of China's economic growth, the terms of trade, Peruvian GDP and private investment. Finally, the findings indicate that the impacts of external shocks on economic growth are more long-term than short-term, and also reveal the existence of fragility in the international economy that can be opportunities on the side of raw material prices.

The effect of CHINA RAILWAY Express on alleviating the Red Sea Waterway Crisis: A GTAP model-based study

In November 2023, the Red Sea Waterway Crisis broke out, which caused the goods originally shipped to Europe via the Red Sea-Suez Canal Route to be transported around the Cape of Good Hope in Africa, thus increasing the shipping cost and shipping time. Firstly, this paper uses the Supply Chain Network Model and the Optimization Model to theoretically analyze the impact of this incident. Secondly, the Global Trade Analysis Project (GTAP) Model is employed to analyze the impact of the crisis on China. At the same time, it also explains whether the impact of the incident can be alleviated by using CHINA RAILWAY Express (CR Express). Finally, this paper compares the upward pressure changes of domestic commodity prices in China, Germany, France, Netherlands and Italy before and after the adoption of CR Express. The results of the study are as follows. (1) The outbreak of the Red Sea Waterway Crisis has a great negative impact on China's macro economy. When China switches to the use of CR Express, the impact on China's GDP and terms of trade is reduced. (2) The outbreak of the Red Sea Waterway Crisis has a greater impact on China's import trade than on its export trade. (3) The outbreak of the Red Sea Waterway Crisis has a great negative impact on China's textile and clothing industry and electronic equipment industry. (4) CR Express can ease the upward pressure of domestic commodity prices. Taken together, the above results can provide reference for China and other countries to cope with similar impact events.

Analysing Real Exchange Rate Effects on the Trade Balance in South Africa

For years, policymakers and economists have been researching the significance of the native currency value versus other currencies in favouring the country’s trade balance and total. Therefore, this study investigates the impact of the real exchange rate change on the trade balance in South Africa. The study used annual time series data from 1980 through 2022. This study used the ARDL technique to analyse data. Variables used in this study include the trade balance, real exchange rate, terms of trade, money supply, South Africa’s gross domestic product, and the Chinese gross domestic product. Bounds tests showed that the variables are cointegrated. According to the empirical findings, the real exchange rates have significantly influenced the trade balance positively in the short run but in the long run, have a negative significant influence on the trade balance. The terms of trade have a positive significant influence on the trade balance in the short run, but it appears to be positively significant in the long run. The money supply in the short run has an insignificant negative relationship with the trade balance but in the long run, has a significant positive relationship with the trade balance. The SA gross domestic product has a significant negative impact on the trade balance both in the short and long run. Lastly, the Chinese gross domestic product has a negative insignificant relationship with the trade balance in the short. However, in the long run, it has a positive significant relationship with the trade balance. This proves that a rise in Chinese GDP, as a proxy for foreign economic activity, boosts South African exports to the rest of the world in the long term. As a result, the trade balance improves as China imports minerals from South Africa for production purposes. The dependence on currency depreciation to enhance trade in South Africa can improve its trade balance, but it may also damage the economy due to the country’s reliance on imports. However, the advice to weaken the South African currency should not be so harsh as to have a negative impact on the importation of key capital goods critical to the growth and development of the South African economy. It is recommended that the government reduce demand for imported products and boost domestic manufacturing, which might lead to domestic products being exported. The central bank must also stabilize the currency to increase competitiveness by decreasing the overseas price of exports and increasing the cost of imports.

The Efficiency of Procurement Process, Organization Performance, and Product Training in Public Organization

The manufacturing sector is considered a key driver of economic progress across different sectors. Industrial products typically enjoy higher "terms of trade," making them more profitable and generating greater added value compared to products from other sectors. This is due to the sector’s diverse range of products and its ability to offer substantial marginal benefits to users. As a result, business players including manufacturers, distributors, traders, and investors are more inclined to participate in this sector because of its attractive profit margins. The government has implemented various initiatives to promote industrial development, which has in turn increased the demand for funding to support this growth, particularly in the industrial sector. In addition to relying on internal sources of finance, the government has been working to secure more external funding, such as foreign investment and foreign loans, to complement development efforts. Given the limited availability of funds, the government needs to adopt policies that open up more opportunities for both domestic and foreign private sector participation in national development. To support this, the government has enacted legislation such as Law No. 1 of 1967 on Foreign Investment (PMA) and Law No. 6 of 1968 on Domestic Investment (PMDN). These laws were later refined through Law No. 11 and Law No. 12 of 1970 and various deregulation policies, including the May 6, 1986 Package, Pakto 1993, and Government Regulation No. 20 of 1994. The government later reorganized its investment policies by passing Law No. 25 of 2007 concerning Capital Investment, which aimed to provide legal certainty, protection, and simplified licensing processes for both domestic and foreign investors. This law is designed to create a more favorable investment environment in Indonesia.

Fiscal Policy, International Spillovers, and Endogenous Productivity

AbstractThe paper presents empirical evidence on the international effects of U.S. fiscal policy from structural vector autoregressions identified through external instruments in a panel setting for the G7 countries. An exogenous increase in U.S. government spending is estimated to produce sizable positive responses of output and consumption in the rest of the G7 countries, both about half as large as their domestic U.S. counterparts, while strongly depreciating the U.S. terms of trade and lowering the U.S. trade balance and short‐run real interest rates. Moreover, fiscal shocks are estimated to have a strongly positive impact on hourly labor productivity in the private sector. We solve a two‐country New Keynesian model in closed form and show that a low cost elasticity of varying technology utilization can simultaneously explain the positive productivity, consumption, and international spillover effects as well as the real depreciation resulting from expansionary U.S. government spending shocks.

INTERNATIONAL SPILLOVERS OF QUALITY REGULATIONS

AbstractThis article investigates the international spillover effects of nondiscriminatory product regulations, for example, quality standards, in a multicountry general equilibrium framework with firm heterogeneity. In the presence of variable markups, when regulations are applied as a fixed cost consistent with stylized facts, they generate a positive spillover on the rest of the world as they induce entry of high‐quality firms and improve the terms of trade of the nonimposing countries. The benefits of such regulations are not fully realized under noncooperative policy settings, rationalizing international cooperation. We estimate our model to quantify the effects of regulations on various welfare‐relevant outcomes.

Linking the BOPC growth model with foreign debt dynamics to goods and labour markets: A BOP-IXSM-Okun model

We link a BOPC growth model to the goods market, foreign debt dynamics, and Okun's law. A new condition for getting the Thirlwall effect of world GDP growth on domestic growth is that investment and export shares of GDP should react less to an increase in the domestic growth rate than savings and import shares. If this condition holds, the Thirlwall effect is present for the equilibrium point of stable and unstable debt/GDP dynamics and for positive or negative reactions of the current account to domestic growth. Okun's law translates the effect on the domestic GDP growth rate to a change of the unemployment rate. Under unstable debt/GDP dynamics, the change of world GDP growth may turn around the direction of the debt/GDP dynamics, a second important foreign growth effect. Estimations support the specification of the theoretical model and lead to simulations of the Thirlwall effect, terms of trade and interest rate shocks on output growth. Profit maximizing bank consortia set interest rates below growth rates ensuring stable debt dynamics in the presence of an interior maximum. Conditions for an interior maximum are empirically violated for Brazil indicating that banks would have to change the economy strongly. A crisis can be less likely through a jump into a steady state for the debt/GDP ratio; unstable, increasing debt/GDP processes through high interest rates cannot be ruled out though and may lead to crises unless the empirics of the stability conditions gets more favourable and leads the country-bank model into a stable steady state or out of indebtedness.

The Determinants of Industrial Output in Pakistan: A Time Series Analysis

This study investigates the determinants of industrial growth in Pakistan through an empirical analysis of quarterly data spanning from 1970 to 2022. Industrial growth is the dependent variable, while the inflation rate, rate of exchange, foreign direct investment, gross fixed capital formation, and terms of trade are independent variables. The Autoregressive Distributed Lag (ARDL) model was employed due to the mixed stationarity, as indicated by the augmented dickey-fuller test. The results reveal a positive long-run relationship between FDI and industrial growth, as well as between gross fixed capital formation and industrial growth. Conversely, a negative relationship is observed between the exchange rate and industrial growth, and between the interest rate and industrial growth. All variables to be statistically significant, except for terms of trade. Furthermore, the inflation rate and rate of exchange show a reducing impact on industrial growth, while FDI and gross fixed capital formation contribute positively to industrial growth.

ҚАРЖЫ-САУДА ЛЕКСИКАНЫҢ СЕМАНТИКАЛЫҚ ДАМУЫ: ҚОР, ҚҰН ЖӘНЕ ТАУАР СӨЗДЕРІ

The richness of the vocabulary of the Kazakh language can be traced in the abundance and diversity of the vocabulary. Especially the large number of words related to finance and economics in the Kazakh language indicates that the Kazakh people have long been well versed in economics and finance. Among the Turkic peoples and languages, the Kazakh language is distinguished by the rich variety of skins and wool, a variety of names for clothing, food, ores, minerals, expensive fabrics, materials, jewelry and the preservation of words of indigenous Turkic origin. The article analyzes the terms and individual names of the financial and economic sphere used in the active vocabulary of the Kazakh language. The very first meaning and etymology of some financial, economic and trade terms in the Kazakh language is given on the basis of data from modern Turkic languages, starting from ancient and medieval Turkic written monuments. Materials from unrelated languages were also used for semantic connections between words and for additional evidence. In this research paper, among the Kazakh financial and economic vocabulary, native words are presented, mainly common to the Turkic languages. In particular, the history of semantic change of active words such as “kor”, “kun” and “tauar” is considered, conclusions about their origin are made.

Küreselleşme sonrası Türkiye’de dış ticaret açığının reel efektif döviz kuru ve dış ticaret hadleriyle modellenmesi: NARDL yaklaşımı

Fluctuations in the real effective exchange rate and changes in the terms of trade can cause predictable or unpredictable changes in the overall economy. The most important consequences of these fluctuations and changes are the effects of regional or global economic crises on macroeconomic variables (employment, unemployment, inflation, GDP, balance of payments, foreign trade deficit). Anticipating the consequences of the dynamic effects of these changes is crucial for policymakers. This study analyzes the effects of changes in CPI-based real effective exchange rates and terms of trade on the trade deficit in 1994-2022. Since the impact of CPI-based real effective exchange rate and terms of trade changes on the trade deficit is likely to be asymmetric, the Nonlinear Auto Regressive Distributed Lag (NARDL) method is used in this study, and it is concluded that the factor that affects the trade deficit the most is the decline in the terms of trade. One of the most important reasons why the foreign trade deficit does not decrease at the desired level, even in periods of depreciation of the TL, is the decline in the country’s terms of trade.

How Important are Commodity Terms of Trade Shocks in Explaining Government Tax Revenue Fluctuations? Evidence from Ethiopia

Using a new database of commodity terms of trade and identifying country-specific commodity export and import price shocks separately, this article mainly aims to examine the importance of commodity export and import price shocks in explaining government tax revenue fluctuations using Ethiopia as an example over the sample period 1980–2019. This article employs a structural vector autoregressive model and forecast error variance decomposition analysis to address this objective. The results show that commodity export and import price shocks account for around 48% of government tax revenue fluctuations. While commodity export price shocks contribute to around 37% of fluctuations in government tax revenue, commodity import price shocks account for only 11% of government tax revenue fluctuations. These findings are discussed in terms of their policy implications. JEL Classification C32, F41, F44

Legal and Practical Aspects of Cartel Detection and Prevent

The work deals with the practical aspects of cartels, both the legal regulation of actions restricting competition and their detection and prevention. Emphasis is placed on the role and importance of competition law in assessing the total economic damage caused by the disregard of competition law by economic agents in the relevant markets and the concerted actions of cartels. The discussion for horizontal (agreement/concerted action between competing economic agents operating in the same product market) and vertical (agreement/concerted action between non-competing economic agents operating in different product markets) cartels is carried out. It is also mentioned that the agreement between the competing economic agents, on the one hand, can reduce, eliminate, or strengthen the competition. However, on the other hand, individual agreements can increase the effectiveness of competition. As for vertical agreements, such an anti-competitive act may occur when a dominant producer/service economic agent offers products/services under preferential conditions to a participating seller/service-receiving economic agent, while discriminating against other economic agents. However, it is also a fact that such an action creates a risk of restriction of competition only if the parties to the agreement (separately or taken together) occupy a dominant position and have market power.In the research, an important place is given to international and local legal mechanisms for detecting cartels, and advanced foreign and Georgian practices are presented in this regard. Finally, the conclusion is made that, in order to detect and prevent concerted actions, the provisions included in the competition law in force in Georgia today (detection and prevention of cartels as actions restricting competition) are in full compliance with advanced international practice and, first of all, with similar norms of the EU countries. However, it is also clear that in the background of the development of contemporary digital technologies, when the specifics of the work of many companies are rapidly changing, which diversifies the ways of making concerted commercial strategic decisions - making the issues of detection and detection of concerted actions by competition agencies even more noteworthy. In this direction, the enforcement institutions of the competition of Georgia, as The Agency of Competition and Consumer Protection of Georgia as well as the supervisory bodies of the regulated sector (enforcing the competition legislation in the regulated sector) will have to make more efforts. Keywords: Cartel, Agreement, Terms of Trade, Restriction of Competition, Sanction, Pricing Algorithm, Agency, Regulated Sector, Business Environment

The determination of the exchange rate: A new-developmental approach

This paper discusses the long-term determination of the exchange rate, given that it may remain depreciated or overvalued for some time. It defines the equilibrium exchange rate and the competitive exchange rate; the latter makes investment projects competitive internationally. Instead of starting from the PPP theory, it starts from the concept of the value of foreign money or the exchange rate around which the price, the exchange rate, revolves according to the supply and demand of foreign money. This, in turn, is influenced by three factors: the terms of trade, the current-account balance as a determinant of the net capital flows or inflows, and the interest rate differential. This paper criticizes the “fundamental equilibrium” concept and develops two econometric tests. The first checks whether the four determinant variables used in the model are relevant. The second verifies whether this model is a good predictor of the exchange rate throughout time.

SYARIAH STOCKS: A NORMATIVE ANALYSIS OF ISLAMIC LAW AND INVESTMENT PRACTICES IN INDONESIA

Syariah stocks have recently gained attention in the Islamic community, which relies on Shariah principles to guide investment decisions. Islam emphasizes the importance of profitable investments that benefit all parties involved, while prohibiting investments that involve uncertainty or exploitation. This article provides an overview of the position of stock shares in Islamic law. Using a normative legal research method, this study analyzed the relevant Islamic texts, including the Quran, Hadith, and Fatwas issued by scholars. Syariah stocks are specifically designed to meet the requirements of Islamic law, which emphasizes transparency, fairness, and ethics in financial transactions. The National Sharia Council of the Indonesian Ulama Assembly (DSN MUI) issued a Fatwa No. 80/DSN-MUI/III of 2011, outlining the implementation of Islamic principles in equity securities trading. The Fatwa stipulates that the means of payment must be known in terms of amount and form, whether in the form of money or goods, and that there should be no payment in the form of debt. Additionally, the time and place of delivery must be clearly specified based on the agreement between parties. This type of contract involves multiple parties, including banking institutions, and must be conducted in accordance with Islamic principles. The Fatwa has contributed to clarifying the terms of stock trading under Islamic law, providing a framework for Syariah stocks to operate within the boundaries of Islamic law.

Harberger-Laursen-Metzler Hypothesis: An Analysis with ARDL Bounds Test Approach

The Harberger, Laursen, and Metzler (HLM) hypothesis posits that a positive (negative) change in terms of trade, ceteris paribus, will lead to positive (negative) movements in the trade balance. When tested on developing countries, the hypothesis yields varying results. Some studies validate the hypothesis, while others suggest it is not applicable. Additionally, causality tests examining long-term relationships also produce different outcomes. Türkiye ranks among the countries with significant trade deficit issues. Therefore, testing the validity of the HLM hypothesis in the context of Türkiye is of great importance. The motivation of this study is to examine the impact of changes in terms of trade on the long-term trade balance in Türkiye from 2013 to 2023. In this context, both the volume and unit value of the terms of trade are considered. According to the findings, there is a positive relationship from terms of trade to the trade balance. Short-term deviations are found to be corrected within approximately three months. The causality test indicates that terms of trade are a Granger cause of the trade balance, and this causality is unidirectional. In this study, Türkiye's terms of trade and trade balance data for the specified periods were meticulously analyzed, and the validity of the HLM hypothesis was carefully tested. The analysis results provide strong evidence supporting the HLM hypothesis. These findings offer significant insights for Türkiye's economy and trade policies.

The Quest for Participating to Global Value Chain in Sub-Sahara Africa: An Analysis of Determining Factors Using a Spatial Panel Model

This paper aims to determine the factors that influence the participation of the Sub-Saharan Africa countries in the global value chain (GVC). The paper use of a spatial panel Model to show that the variability of participation in the global value chain is explained by the total factor productivity, the dollar rate, the terms of trade, the type of economic zone and the degree of integration of countries into the Global Economy (Globalization). Empirical evidence displays a positive link between the total factor productivity growth and the participation in the global value chain. The rise of the Dollar against the Euro strengthens the participation in the global value chain. The deterioration of the terms of trade decreases participation in the global value chain. Special Economic Zones have a positive effect on the global value chain. On the other hand, a significant negative relationship between the free trade zones and participation in the GVC is observed. Finally, with the exception of the Economic Globalization Index and Political Index, all the other indexes have a positive and significant impact on participation in the GVC. The Sub-Saharan African countries have an interest in becoming more integrated into the globalization of trade, information technology and finance. They must also promote economic and political integration.

A DSGE Model of the Russian Residential Real Estate Market

The paper develops a dynamic stochastic general equilibrium (DSGE) model of the Russian economy based on an endogenous housing sector and three categories of homeowners – patient, impatient and non-Ricardian. The DSGE model is applied from the first quarter of 2010 to the fourth quarter of 2019 using a Bayesian method for minimizing the discrepancy between theoretical and empirical impulse responses to a shock due to modified terms of trade. The model is then employed to provide a quantitative assessment of how macro variables respond to shocks generated by the housing market, interest rates, mortgage subsidies, financial liberalization, and altered terms of trade. At the same time, the impact of shocks on a number of economic indicators is largely determined by the functional form of household utility, as demonstrated by the robustness test. The results obtained based on the model also do not demonstrate a strong inertial effect in the economy due to the revival of the residential real estate construction sector, and they contradict a number of studies and expert estimates based primarily on the input-output model. One reason for this discrepancy may be the analysis, which is based on a horizontal supply curve, resulting in an overestimation of the impact of the construction sector on the economy. This DSGE model can serve as a starting point for scenario-based projections of the dynamics of the residential real estate market and the associated mortgage market, for testing the impact of various policy measures on the housing sector, and for assessing their effects on various categories of households.

Challenges in Achieving Consensus on Data Localization: Digital Inequality of Digital Service Trade

The disagreements on data localization policies significantly hamper the progression of digital service trade and free cross-border data flow. This study adopts the Theory of Comparative Advantage and the Heckscher-Ohlin Theory (H-O Theory) to construct an analytical model that investigates the inequality of digital service trade on the well-being of nations and the valuation of digital factors. Our findings suggest that digital service trade exacerbates the terms of trade for developing countries. In an environment of unrestricted data flow, developed countries capitalize on the data resources from developing nations, thereby augmenting their digital comparative advantages and factor endowments. The dynamics foster a state of digital inequality or digital poverty, where late-developing countries are disadvantaged in keeping pace with their developed counterparts. Notably, data localization, while seemingly a protective measure for developing countries, may not be the optimal strategy. It potentially undermines the overall well-being of all participants by diminishing network effects. The paper argues that the path towards the liberalization of digital trade and data flows will be a lengthy and complex one, demanding concerted international efforts to overcome entrenched trade barriers.

Alternative Exchange Rate Systems for Oil-Exporting Countries: Frankel’s Currency-Plus-Commodity Basket Proposal versus the Current System

Choosing an appropriate exchange rate regime is crucial for economic policy, particularly for developing countries seeking to establish robust macroeconomic frameworks to mitigate external shocks. However, such nations, including those reliant on oil and natural gas exports, often face challenges in selecting suitable regimes, exacerbated by a lack of traditional advice. The debate around this issue intensified in the aftermath of the 2014 oil price decline. In response, Jeffrey Frankel proposed the currency-plus-commodity basket (CCB) arrangement in 2017, blending the benefits of floating and pegging. This study applies the CCB system to Algeria, aiming to evaluate its impact compared to the current managed floating regime from 2001 to 2021, on indicators of internal (inflation rates) and external (change in foreign exchange reserves) balance using monthly data. Employing wavelet analysis and robustness tests, specifically quantile-on-quantile regression (QQR), the findings suggest that the CCB regime surpasses managed floating in maintaining monetary stability and achieving internal and external balance. Moreover, it provides greater flexibility and stimulates the domestic economy through its ability to stabilize terms of trade via active countercyclical monetary policy. Nonetheless, further discussion, adjustment, experimentation, and development of the proposed regime are warranted.

What Are the Economic Impacts of Indonesia’s Export Ban? A Computable General Equilibrium Analysis

This study aims to assess the economic impact of the mineral export ban on Indonesia and other countries. The comparative-static version of the computable general equilibrium model (Global Tarde Analysis Project (GTAP)) is used to analyse the economic impact of the export ban, with a particular focus on GDP, welfare, terms of trade and external trade. The most recent GTAP version 9 database was used for the modelling simulations of the Indonesian export ban. The GTAP version 9 database has three reference years: 2004, 2007 and 2011. It already aggregates 140 regions and 57 sectors. The modelling simulation results show that the policy of bauxite, copper and tin export tyres benefits the Indonesian economy. Meanwhile, Indonesia’s export ban policy harmed the economies of other countries, particularly China, Japan, India, Korea and the EU-28.