TY  - JOUR
AU  - Turnovsky,Stephen J.
TI  - The Impact of Terms of Trade Shocks on a Small Open Economy: A Stochastic Analysis
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3916
PY  - 1993
Y2  - July 1993
UR  - http://www.nber.org/papers/w3916
L1  - http://www.nber.org/papers/w3916.pdf
N1  - Author contact info:
Stephen Turnovsky
Department of Economics
301 Savery Hall; Mail Stop DK 30
University of Washington
Seattle, WA   98195
Tel: 206-545-8028
E-Mail: sturn@u.washington.edu
AB  - This paper investigates the impact of change in the terms of trade on the economic performance of a small economy. Both the effects of unanticipated shocks and changes in the mean and variance of the probability distribution generating these disturbances are discussed. In all cases, the key element determining the response of the economy is the effect on the rate of growth of real wealth, to which all other real quantities are directly tied in equilibrium. Conditions for the Harberger-Laursen-Metzler effect to hold are discussed. The impact of these changes on economic welfare, as measured by expected discounted utility of the representative agent is also addressed.
ER  -