Terms of trade, technical progress and economic growth
DOI:
https://doi.org/10.18381/eq.v19i1.7228Abstract
Objective: We study, theoretically and empirically, the relationship between terms of trade and the growth rate of GDP per capita. Methodology: In the theoretical part, we develop a growth model with two sectors, primary (export sector) and manufacturing (import sector). We deduce the aggregated product of the economy. In the long run, terms of trade and the growth rate of GDP per capita are positively related. In order to contrast the theoretical result, in the empirical part, we apply time series analysis for Peru. Results: We show that terms of trade and the growth rate of GDP per capita are cointegrated for Peru. Limitations: The article only analyzes the aggregate relationship between terms of trade and the growth rate of GDP per capita. Originality: We study integrally (with theory and data) the relationship between terms of trade and the growth rate of GDP per capita for an economy that exports raw materials. Conclusions: For Peru, an exporter of raw materials, the terms of trade are a determinant of its economic growth.Downloads
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