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The adjustment effect of the extensive margin on the terms of trade during economic crises

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  • Kang, Kichun

Abstract

Variations in trade flows after economic crises are largely explained by the destruction and creation of trade varieties. This paper investigates the adjustment effect of the extensive margin on the terms of trade of South Korea, which witnessed large trade variations during the 1997 Asian and 2008 global crises. We demonstrate that the conventional terms of trade suffered severely because of ignoring the changes in trade varieties during the economic crises.

Suggested Citation

  • Kang, Kichun, 2019. "The adjustment effect of the extensive margin on the terms of trade during economic crises," Economics Letters, Elsevier, vol. 176(C), pages 5-8.
    • Handle: RePEc:eee:ecolet:v:176:y:2019:i:c:p:5-8
    DOI: 10.1016/j.econlet.2018.11.026
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    References listed on IDEAS

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    1. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 541-585.
    2. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    3. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2009. "The Margins of US Trade," American Economic Review, American Economic Association, vol. 99(2), pages 487-493, May.
    4. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
    5. Andrew Bernard & J Bradford Jensen & Stephen Redding & Peter Schott, 2009. "The Margins of U.S. Trade (Long Version)," Working Papers 09-18, Center for Economic Studies, U.S. Census Bureau.
    6. Feenstra, Robert & Kee, Hiau Looi, 2008. "Export variety and country productivity: Estimating the monopolistic competition model with endogenous productivity," Journal of International Economics, Elsevier, vol. 74(2), pages 500-518, March.
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    Cited by:

    1. Fabrice Nzepang & Saturnin Bertrand Nguenda Anya, 2022. "Effects of ICTs on the Terms of Trade of Sub-Saharan African Economies," Journal of African Trade, Springer, vol. 9(1), pages 107-119, December.

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    More about this item

    Keywords

    Economic crisis; Extensive margin; Terms of trade;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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