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Terms‐of‐trade effects of productivity shocks in developing economies

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  • Emre Özçelik
  • Mustafa Tuğan

Abstract

This paper studies the terms‐of‐trade effects of economy‐specific shocks to productivity in developing economies using a panel vector autoregression model with interactive fixed effects and the “max‐share” approach. We find that the terms of trade after unanticipated changes in economy‐specific productivity mostly exhibit insignificant dynamics in the developing economies. However, we present evidence that they can significantly deteriorate in a particular set of developing countries, namely the ones with a high score on technological deepening and upgrading.

Suggested Citation

  • Emre Özçelik & Mustafa Tuğan, 2024. "Terms‐of‐trade effects of productivity shocks in developing economies," Review of International Economics, Wiley Blackwell, vol. 32(4), pages 1587-1606, September.
    • Handle: RePEc:bla:reviec:v:32:y:2024:i:4:p:1587-1606
    DOI: 10.1111/roie.12746
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