Trade openness, investment instability and terms-of-trade volatility

• 成果类型: Article
• 署名作者: Razin, A; Sadka, E; Coury, T
• 署名单位: Tel Aviv University; Cornell University
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/S0022-1996(03)00014-X
• 发表日期: 2003
• 页码: 285-306
• 关键词: Trade openness; terms-of-trade volatility; lumpy adjustment cost of investment; multiple equilibria

摘要

In the presence of economies of scale in the investment technology, trade openness may have non-conventional effects on the level of investment, its cyclical behavior, and the volatility of the terms of trade. Trade openness may lead to boom-bust cycles of investment supported by self-fulfilling expectations. The economy may oscillate between 'optimistic' expectations, 'good' terms-of-trade and investment boom to 'pessimistic' expectations, 'bad' terms-of-trade and investment bust. We also suggest that the likelihood of such oscillations is higher for developing than for developed economies, because the former may typically incur higher setup costs of investment. This phenomenon may help to explain the excessive volatility of the terms of trade of developing countries, relative to industrial countries. (C) 2003 Elsevier B.V. All rights reserved.