Sharp swings in a developing country's terms of trade - the price of its exports relative to the price of its imports - can seriously disrupt output growth. An analysis of the effects of a decline in export prices in seventy-five developing economies suggests that countries with a flexible...

I examine the effect of exogenous terms of trade shocks on an exchange rate by turning to New Zealand's dairy auctions. Dairy is New Zealand's largest export category, making up almost 20 percent of exports. Specifically, whole milk powder accounts for 6 to 11 percent of total exports, and its...

Dutch disease is often referred as a situation in which large and sustained foreign currency inflows lead to a contraction of the tradable sector by giving rise to a real appreciation of the home currency. This paper documents that this syndrome has been witnessed by many emerging markets and...

Many developing countries have adopted investor-friendly policies in recent years in order to attract export-oriented foreign direct investment (FDI). The effects of these policies on the external accounts have been largely ignored. This paper endogenizes FDI inflows in a structuralist general...

We analyze the way in which Latin American countries have adjusted to commodity terms of trade (CTOT) shocks in the 1970-2007 period. Specifically, we investigate the degree to which the active management of international reserves and exchange rates impacted the transmission of international...

Latin American economies are exposed to substantial external vulnerability. Domestic imbalances and terms of trade shocks are often exacerbated by sudden stops of capital inflow. In this paper we explore ways of overcoming external vulnerability, drawing lessons from a detailed comparison of the...