Can Globalisation Stop the Decline in Commodities' Terms of Trade?

André Varella Mollick (1) , João Ricardo Faria (2) , Pedro Albuquerque (3, 4) , Miguel A. León-Ledesma (5)

1 CoBA - College of Business Administration
2 MPA - Master in Public Administration
3 Euromed Marseille - École de management
4 DEFI - Centre de recherche en développement économique et finance internationale
5 School of Economics

In this paper we address the following question: would a fully integrated world economy eliminate the widely reported decline in the terms of trade of primary commodities? We address the question by looking at the terms of trade within the US (a highly integrated economy). Our findings show two results. First, US internal real commodities' terms of trade over the 1947-1998 period experienced slowly declining but significant trends. Second, once we control for the effect of US prices on international terms of trade, we find a long-run relationship between the US and international relative prices. These findings support the view that the decline of commodities' terms of trade bears no relationship with the process of globalisation. This seems to indicate that, if world terms of trade behaved as the US terms of trade, neither increased integration nor protectionist measures would eliminate this trend.

Mots clés: Economic integration; Globalisation; Prebisch-Singer

Domaines: Economies et finances

André Varella Mollick, João Ricardo Faria, Pedro Albuquerque, Miguel A. León-Ledesma. Can Globalisation Stop the Decline in Commodities' Terms of Trade?. Cambridge Journal of Economics, 2008, 32 (5), pp.683-701. ⟨10.1093/cje/bem054⟩. ⟨halshs-00746269⟩