Aggregate spending and the terms of trade : There is a Laursen-Metzler effect
Haaparanta, Pertti (16.10.1987)
Numero
12/87Julkaisija
Bank of Finland
1987
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe2023070373986Tiivistelmä
Using the uncertain lifetimes overlapping generations model it is argued that terms of trade changes have very different effects depending on the net foreign asset position of the country. In a creditor country the deterioration of terms of trade has the classic Laursen-Metzler effect, since in order to sustain spending lending abroad is reduced. The reverse conclusion holds for a debtor country. It is also shown that these conclusions are robust with respect to the type of the terms of trade shock.