This paper examines the implications of terms of trade vulnerability for a perfectly competitive, small open economy with incomplete risk markets. Conditions are obtained for which an improvement in the mean terms of trade raises welfare and for which an increase in the variance of the terms of...

We construct a partial equilibrium model of a risk averse monopolist who faces an uninsurable uncertain foreign demand and a constant marginal cost, and makes an ex-ante production plan, committing ex-post to the ex-ante price. Optimal government intervention is considered when the good is only...