Country terms of trade: Trends, unit roots, over-differencing, endogeneity, time dummies, and heterogeneity

Ziesemer, Thomas (2011). Country terms of trade: Trends, unit roots, over-differencing, endogeneity, time dummies, and heterogeneity. UNU-MERIT.

Document type:
Report

Metadata
Documents
Versions
Statistics
  • Attached Files (Some files may be inaccessible until you login with your UNU Collections credentials)
    Name Description MIMEType Size Downloads
    wp2011-065.pdf PDF application/pdf 597.30KB
  • Author Ziesemer, Thomas
    Title Country terms of trade: Trends, unit roots, over-differencing, endogeneity, time dummies, and heterogeneity
    Publication Date 2011
    Publisher UNU-MERIT
    Abstract Abstract. The debate about the Prebisch-Singer thesis has focused on primary commodities with some extensions to manufactures. As we think that the link between the terms of trade and long-run development, growth and convergence is the ability of exports to enhance investment through importing capital goods we analyse trends in country terms-of-trade for goods and services rather than those for commodities. Open economy growth models may be observationally equivalent to closed economy growth models under special conditions where they generate constant though endogenous terms of trade. We therefore consider trends in terms of trade for country groups according to the World Bank income classification. We find that all groups but the poorest have common unit roots, but none has individual unit roots. As low-income countries have no unit roots, over-differencing is inefficient and biases significance levels in first differences against the fall in the terms of trade. For the low-income countries the terms of trade of goods and services are falling at a rate that is significantly negative without and with endogeneity treatment by system GMM. A comprehensive analysis of the effects of time dummies supports the result of falling terms of trade for low-income countries. When all coefficients are country-specific 50% of all low-income countries have falling terms of trade in a simultaneous equation estimation using the SUR method.
    Keyword Country terms of trade
    Prebisch-singer thesis
    Long-run development
    World bank income classification
    JEL F43
    O19
    Copyright Holder UNU-MERIT
    Copyright Year 2011
  • Versions
    Version Filter Type
  • Citation counts
    Google Scholar Search Google Scholar
    Access Statistics: 602 Abstract Views, 410 File Downloads  -  Detailed Statistics
    Created: Wed, 11 Dec 2013, 17:00:20 JST