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- Title
AGGREGATE SPENDING AND THE TERMS OF TRADE: IS THERE A LAURSEN-METZLER EFFECT?
- Authors
Obstfeld, Maurice
- Abstract
This paper investigates the spending and current-account effects of terms-of-trade shifts in a model where households maximize utility over an infinite planning period. In the framework developed here, an economy specialized in production must experience a fall in aggregate spending and a current surplus as a result of an unanticipated, permanent worsening in its terms of trade. The paper's model thus provides a setting in which the current-account deficit predicted by Laursen and Metzler, Harberger, and others fails to materialize.
- Subjects
CONSUMPTION (Economics); HOUSEHOLDS; ECONOMICS; PRODUCTION (Economic theory); TERMS of trade; SURPLUS (Economics)
- Publication
Quarterly Journal of Economics, 1982, Vol 97, Issue 2, p251
- ISSN
0033-5533
- Publication type
Article
- DOI
10.2307/1880757