Working Paper: NBER ID: w1848
Authors: Catherine Morrison; W. Erwin Diewert
Abstract: In this paper we employ a recently proposed procedure (Dlewert and Morrison[1985]) for adjusting real domestic product and productivity for changes in a country's terms of trade. We apply this procedure to a comparison of two major industrialized countries, the U.S. and Japan. The approach is based on assessing the impact on, alternatively, production or final sales to domestic purchasers, of changes in terms of trade and the balance of payments deficit in a consistent accounting framework. This treatment of international trade allows for comparative statics analysis based only on production theory. The comparison is carried out for a relatively open economy, Japan, with an economy that may not be as vulnerable to terms of trade changes, the U.S. for the years 1967 to 1982.
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JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| changes in the terms of trade (F14) | productivity (O49) |
| changes in the terms of trade (F14) | welfare (I38) |
| favorable changes in the terms of trade (F14) | domestic production (D20) |
| fluctuations in the balance of payments deficit (F32) | domestic output (E23) |
| fluctuations in the balance of payments deficit (F32) | welfare (I38) |