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Decomposing Terms of Trade Fluctuations in Ethiopia

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  • Loening, Josef L.
  • Higashi, Masato

Abstract

This paper proposes a technique to decompose short-run fluctuations in the terms of trade. Using Ethiopia as an example, we decompose the commodity terms of trade into various components to measure the impact of price and volume shifts as well as export diversification. We use monthly data from the past decade, including periods during the global food and financial crises. Our findings suggest that diversification out of traditional coffee exports to other export commodities successfully mitigated a terms of trade shock. Continued export diversification will be beneficial.

Suggested Citation

  • Loening, Josef L. & Higashi, Masato, 2011. "Decomposing Terms of Trade Fluctuations in Ethiopia," VfS Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48727, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc11:48727
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    References listed on IDEAS

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    1. Marianne Baxter & Michael A. Kouparitsas, 2006. "What Can Account for Fluctuations in the Terms of Trade?," International Finance, Wiley Blackwell, vol. 9(1), pages 63-86, May.
    2. Fátima Cardoso & Paulo Esteves, 2008. "What is behind the recent evolution of Portuguese terms of trade?," Working Papers w200805, Banco de Portugal, Economics and Research Department.
    3. Lloyd, P. J. & Procter, R. G., 1983. "Commodity decomposition of export-import instability : New Zealand," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 41-57.
    4. Cashin, Paul & McDermott, C. John & Pattillo, Catherine, 2004. "Terms of trade shocks in Africa: are they short-lived or long-lived?," Journal of Development Economics, Elsevier, vol. 73(2), pages 727-744, April.
    5. Blattman, Christopher & Hwang, Jason & Williamson, Jeffrey G., 2007. "Winners and losers in the commodity lottery: The impact of terms of trade growth and volatility in the Periphery 1870-1939," Journal of Development Economics, Elsevier, vol. 82(1), pages 156-179, January.
    6. Loening, Josef L. & Durevall, Dick & Birru, Yohannes A., 2009. "Inflation dynamics and food prices in an agricultural economy : the case of Ethiopia," Policy Research Working Paper Series 4969, The World Bank.
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    Cited by:

    1. Durevall, Dick & Loening, Josef L. & Ayalew Birru, Yohannes, 2013. "Inflation dynamics and food prices in Ethiopia," Journal of Development Economics, Elsevier, vol. 104(C), pages 89-106.
    2. Magomedov, Rustam (Магомедов, Рустам) & Idrisova, Vittoria (Идрисова, Виттория), 2018. "Sectoral Indices of the Terms of Trade: Development of Methodology and Overview for Russia [Отраслевые Индексы Условий Торговли: Разработка Методики И Обзор Для России]," Working Papers 061822, Russian Presidential Academy of National Economy and Public Administration.

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    More about this item

    Keywords

    Terms of Trade; Food Price Crisis; Financial Crisis; Ethiopia;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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