Terms of trade Shocks and Optimal Investment is popular PDF and ePub book, written by Luis Serven in 1999, it is a fantastic choice for those who relish reading online the Uncategoriezed genre. Let's immerse ourselves in this engaging Uncategoriezed book by exploring the summary and details provided below. Remember, Terms of trade Shocks and Optimal Investment can be Read Online from any device for your convenience.
Terms of trade Shocks and Optimal Investment Book PDF Summary
February 1995 Conventional analyses of the effect of terms-of-trade shocks provide a misleading view of their impact on investment and the current account, because capital goods imports are excluded from the analytical framework -- an exclusion both arbitrary and unrealistic. Conventional analyses of the effect of terms-of-trade shocks provide a misleading view of their impact on investment and the current account, says Serven, because capital goods imports are excluded from the analytical framework. He argues that such an exclusion is both arbitrary and unrealistic. Serven reexamines the consequences of permanent and transitory changes in the terms of trade in a rational-expectations model of a small open economy with intertemporally optimizing agents, and with trade in both consumption and capital goods. In this framework, the response to a permanent terms of trade improvement is unambiguous: The long-run capital stock, and thus investment, must rise, and the current account must deteriorate -- exactly the opposite of the Laursen-Metzler effect. A transitory improvement in the terms of trade raises saving but has an uncertain effect on investment. So, the impact on the current account is generally ambiguous and is shown to depend on three factors: the import contents of consumption and investment, the duration of the windfall, and the degree of intertemporal substitutability in both consumption and investment. This paper -- a product of the Macroeconomics and Growth Division, Policy Research Department -- is part of a larger effort in the department to understand the macroeconomic impact of policy shifts and external shocks. The author may be contacted at [email protected].
Detail Book of Terms of trade Shocks and Optimal Investment PDF
- Author : Luis Serven
- Release : 21 September 1999
- Publisher : World Bank Publications
- ISBN : 978186723xxxx
- Genre : Uncategoriezed
- Total Page : 34 pages
- Language : English
- PDF File Size : 18,8 Mb
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