We examine the current account effect of a terms-of-trade deterioration for a small country model, incorporating weakly nonseparable preference a la Shi (1994) under endogenous time preference.

GDP growth is likely to remain strong, although narrowly driven by a mining investment boom, increasing the economy’s vulnerability to terms of trade shocks. Outside the mining sector, growth is expected to be slow with still weak consumer confidence and a strong exchange rate weighing on...