TY  - JOUR
AU  - Obstfeld,Maurice
TI  - Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 686
PY  - 1981
Y2  - June 1981
UR  - http://www.nber.org/papers/w0686
L1  - http://www.nber.org/papers/w0686.pdf
N1  - Author contact info:
Maurice Obstfeld
Department of Economics
University of California, Berkeley
530 Evans Hall #3880
Berkeley, CA 94720-3880
Tel: 510/643-9646
Fax: 510/642-6615
E-Mail: obstfeld@econ.berkeley.edu
AB  - This paper investigates the spending and current-account effects of permanent terms-of-trade shifts in a model where households maximize utility over an infinite planning period. In the framework we adopt, an economy specialized in production must experience a fall in aggregate spending and a current surplus when the terms of trade permanently deteriorate The model thus provides a counter-example to the argument of Laursen and Idetzler (1950) and Harberger (1950) that a permanent worsening in the terms of trade must produce a current-account deficit.
ER  -