Terms-of-trade effects of productivity shocks in developing economies

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ÖZÇELİK E., Tuğan M.

Review of International Economics, vol.32, no.4, pp.1587-1606, 2024 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 32 Issue: 4
  • Publication Date: 2024
  • Doi Number: 10.1111/roie.12746
  • Journal Name: Review of International Economics
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, Periodicals Index Online, ABI/INFORM, Business Source Elite, Business Source Premier, EconLit, Geobase, Public Affairs Index, vLex
  • Page Numbers: pp.1587-1606
  • Keywords: productivity shocks, small-country assumption, terms of trade
  • Middle East Technical University Affiliated: Yes

Abstract

This paper studies the terms-of-trade effects of economy-specific shocks to productivity in developing economies using a panel vector autoregression model with interactive fixed effects and the “max-share” approach. We find that the terms of trade after unanticipated changes in economy-specific productivity mostly exhibit insignificant dynamics in the developing economies. However, we present evidence that they can significantly deteriorate in a particular set of developing countries, namely the ones with a high score on technological deepening and upgrading.