NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Dynamics of the Trade Balance and the Terms of Trade: The S-Curve

David Backus, Patrick J. Kehoe, Finn E. Kydland

NBER Working Paper No. 4242
Issued in December 1992
NBER Program(s):   IFM

We provide a theoretical interpretation of two features of international data: the countercyclical movements in net exports and the tendency for the trade balance to be negatively correlated with current and future movements in the terms of trade, but positively correlated with past movements. We document these same properties in a two-country stochastic growth model in which trade fluctuations reflect, in large part, the dynamics of capital formation. We find that the general equilibrium perspective is essential: The relation between the trade balance and the terms of trade depends critically on the source of fluctuations.

download in pdf format
   (2576 K)

email paper

This paper is available as PDF (2576 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w4242

Published: "Dynamics of the Trade Balance and the Terms of Trade: the J Curve?" American Economic Review, 84 (March 1994) pp 84-103.

Users who downloaded this paper also downloaded these:
Persson and Svensson w1129 Current Account Dynamics and the Terms of Trade: Harberger-Laursen-Metzler Two Generations Later
De Gregorio and Wolf w4807 Terms of Trade, Productivity, and the Real Exchange Rate
Backus, Kehoe, and Kydland w4493 International Business Cycles: Theory and Evidence
Backus, Kehoe, and Kydland w4243 Relative Price Movements in Dynamic General Equilibrium Models of International Trade
Bernheim Budget Deficits and the Balance of Trade
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us