The Terms of Trade
My terms of reference call for ‘a review of what is known historically of long-term movements in the terms of trade plus a discussion of factors relevant to speculations about future trends’. This is a large and controversial subject, and the literature is quite extensive. In this brief survey, I cannot hope to explore the subject fully in all its aspects. What I propose to do is to draw attention to the main issues, particularly as they bear on the problems of economic development. Before turning to this task, however, a few remarks about the uses and limitations of the terms of trade in the sphere of development may provide a useful background to the discussion. Since controversy has raged as much on the accuracy of the statistical estimates of the terms of trade as on the economic and welfare interpretations to be placed upon them, one does not need to be apologetic about treading again a time-worn path. I propose, then, to divide the discussion into three parts. The first part will consider the usefulness of various measures of the terms of trade in the analysis of development problems; the second will examine the historical movement; and the third will discuss the future prospects.
KeywordsPrice Level National Income Trade Balance External Trade International Prex
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