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Can Globalisation Stop the Decline in Commodities' Terms of Trade?

Author

Listed:
  • André Varella Mollick

    (CoBA - College of Business Administration - University of Texas-Pan American)

  • João Ricardo Faria

    (MPA - Master in Public Administration - UTEP - University of Texas [El Paso])

  • Pedro Albuquerque

    (Euromed Marseille - École de management - Association Euromed Management - Marseille, DEFI - Centre de recherche en développement économique et finance internationale - GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Miguel A. León-Ledesma

    (School of Economics - University of Kent [Canterbury])

Abstract

In this paper we address the following question: would a fully integrated world economy eliminate the widely reported decline in the terms of trade of primary commodities? We address the question by looking at the terms of trade within the US (a highly integrated economy). Our findings show two results. First, US internal real commodities' terms of trade over the 1947-1998 period experienced slowly declining but significant trends. Second, once we control for the effect of US prices on international terms of trade, we find a long-run relationship between the US and international relative prices. These findings support the view that the decline of commodities' terms of trade bears no relationship with the process of globalisation. This seems to indicate that, if world terms of trade behaved as the US terms of trade, neither increased integration nor protectionist measures would eliminate this trend.

Suggested Citation

  • André Varella Mollick & João Ricardo Faria & Pedro Albuquerque & Miguel A. León-Ledesma, 2008. "Can Globalisation Stop the Decline in Commodities' Terms of Trade?," Post-Print halshs-00746269, HAL.
    • Handle: RePEc:hal:journl:halshs-00746269
    DOI: 10.1093/cje/bem054
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    7. Byrne, Joseph P. & Fazio, Giorgio & Fiess, Norbert, 2013. "Primary commodity prices: Co-movements, common factors and fundamentals," Journal of Development Economics, Elsevier, vol. 101(C), pages 16-26.
    8. Trofimov, Ivan D., 2018. "Income terms of trade and economic convergence: Evidence from Latin America," MPRA Paper 87598, University Library of Munich, Germany.
    9. Leon Podkaminer, 2014. "Does trade drive global output growth?," Bank i Kredyt, Narodowy Bank Polski, vol. 45(4), pages 311-330.
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    More about this item

    Keywords

    Economic integration; Globalisation; Prebisch-Singer;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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