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| Author: | Boileau, M. |
| Title: | Trade in capital goods and the volatility of net exports and the terms of trade |
| Journal: | Journal of International Economics
1999 : AUG, VOL. 48:2, p. 347-365 |
| Index terms: | Business cycles Exports Trade policy Volatility Equilibrium analysis Models |
| Language: | eng |
| Abstract: | Standard two-country dynamic general equilibrium models grossly underpredict the volatility of net exports and the terms of trade. It is analyzed in this paper whether trade in capital goods (equipment) can explain this failure. Trade in equipment accounts for about half of the trade balance of G7 countries and most of its fluctuations over the period from 1971 to 1990. Simulation results show that standard model with trade in final goods generates a volatility of 0.10 for net exports and 0.52 for the terms of trade. Models with trade in equipment, however, generate a volatility btw. 0.55 and 0.98 for net exports and btw. 1.23 and 3.24 for the terms of trade. |
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