-
Trends And Cycles In The Net Barter Terms Of Trade For Sub-Saharan Africa's Primary Commodity Exporters
- The Journal of Developing Areas
- Tennessee State University College of Business
- Volume 46, Number 2, Fall 2012
- pp. 213-229
- 10.1353/jda.2012.0024
- Article
- Additional Information
This paper addresses terms of trade shocks in four commodity-exporting countries: Botswana, Cote d'Ivoire (Ivory Coast), Ghana and Zambia. We address both the short run cyclical fluctuations and the long run trends. The latter is important for importing countries with respect to the uncertainties associated with production and manufacturing. For exporting countries, it enables policy makers to cope with price risk in international markets. Using unobseved components models we showed that a shock to the terms of trade dissipate between 2 and 9 years, with the long run trend indicating the tendency for the net barter terms of trade to decline over time. In addition, we showed that the shorter the shocks to the terms of trade, and the longer the frequency of the shock, the more severe the accumulated long run loss in welfare and output. Hedging the downside risk of commodity price busts, commodity beneficiation among others are suggested as policy menus for smoothing the path of income and consumption.