The Consumption Terms of Trade and Commodity Prices Abstract: Movements in a nation's terms of trade are widely viewed as important for the understanding the sources of business cycle fluctuations, the dynamics of the trade balance and economic welfare. Backus, Kehoe and Kydland (1994) emphasize...

We extend the Cole and Obstfeld model in a number of directions to more accurately assess the terms of trade channel. Two crucial theoretical extensions are: to allow multiple producers of each primary commodity and to allow for incomplete specialization.We find that the negative correlation...

The national terms of trade, defined as the ratio of an export price index to an import price index has been extensively studied empirically. In this paper we construct an alternative measure, which we call the consumption terms of trade. This measure recognizes the fact that consumers and firms...

Movements in a nation's terms of trade are widely viewed as important for the understanding the sources of business cycle fluctuations, the dynamics of the trade balance and economic welfare. Backus, Kehoe and Kydland (1994) emphasize the role of productivity movements in a two-country, two-good...

Cole and Obstfeld (1991) exposited a classic result where equilibrium movements in the terms of trade could make ex ante risk-sharing arrangements unnecessary: a unity elasticity of substitution across goods and production specialization. This paper extends their model to <i>N</i> countries and <i>M</i>...