Assuming preferences to be generated by an aggregate utility function, an aggregate demand function for imports and exports is defined as a function of import and export prices and the deficit in the balance of payments on current account, in a model with nontradable as well as traded goods. It is shown that this function is integrable, hence can be generated by maximizing a utility function (w...

We examine two important aspects of Australia’s terms of trade using 135 years of annual data up to 2003/04. Since Australia predominantly exports commodities and imports manufactures, the Prebisch-Singer hypothesis suggests that there should be a negative trend in the terms of trade. But the trend is no more than −0.1 per cent per annum, less than the trend decline in world commodity prices re...

Commodities (rural and non-rural) account for a significant proportion of Australia’s exports. Even though tourism and manufactured exports have grown strongly in recent years, earnings from commodities were around two thirds of total export earnings from goods and services in 1991/92. This was despite the cyclically low level of prices. Furthermore, the volatility of commodity prices is an imp...

Export taxes can provide additional welfare to large exporters, an argument for interventions in many primary commodity exporting countries. We investigate the benefits of export taxation for Côte d'Ivoire, the dominant exporter of cocoa. Where many applications treat the formula for optimal export taxes incorrectly as a prescription, we take the endogeneity of the exporter’s share into account...

Many papers in the recent literature in open economy macroeconomics make different assumptions about the currency in which firms set their export prices when nominal prices must be pre-set. But to date, all of these studies take the currency of price setting as exogenous. This paper sets up a simple two-country general equilibrium model in which exporting firms can choose the currency in which ...

How does an unexpected domestic monetary expansion affect the foreign economy? Does it induce an increase or a decline in foreign production? In the traditional two-country Mundell-Fleming model, monetary policy has «beggar-thy-neighbor» effects. Yet, empirical evidence from VARs indicates that U.S. monetary policy has positive international transmission effects on both foreign (non-U.S. G-7) o...