terms of trade


Also found in: Dictionary, Financial, Acronyms, Wikipedia.

terms of trade

the changing overall ratio of the prices (or VALUES) a country must pay for the goods and services it imports and the prices (or values) it is able to obtain for the goods and services it exports. This is usually measured by a quotient obtained by dividing an index number of the prices of goods and services sold by an index number of those obtained. In recent decades, a deterioration in the terms of trade between developed and less developed countries has posed a persistent problem for the latter, brought about by, e.g.:
  1. the substitution of agricultural products by synthetic, industrially produced replacements; and
  2. the ‘income elasticity’ (see ELASTICITY OF SUPPLY AND DEMAND) for foodstuffs (i.e. people in developed societies can eat only so much food). Efforts to overcome the problem of adverse terms of trade for many of the goods produced by poorer countries include the diversification of their pattern of production for international markets, but this, if it can be achieved at all, is a long-term process in which some developing nations (e.g. those richer in natural resources, and achieving relative political stability) are more successful than others. See also INTERNATIONAL TRADE, UNEQUAL EXCHANGE.
References in periodicals archive ?
Under the assumption that goods are normal, each country's tariff revenue increases with its terms of trade.
Higher income enjoyed by nation C from its foreign investments results in a positive terms of trade externality for the exporting nations.
He used them also to estimate the impact of tariffs and technology shocks on the terms of trade.
its main concern was with the welfare impact of terms of trade upon industrial countries and developing countries respectively' (singer 1989, p.
On both occasions, there was a negative contribution of trade volumes (of the order of $10 to $20 billion) to the change in the trade balance, but unfavourable terms of trade played an important role in the first period, when the dollar depreciated by 27 per cent in effective terms, compared with just 3 per cent between 1990 and 1992.
US)], because both the terms of trade and the volume of imports are lower.
The relationship between labour productivity growth and the growth of consumption wages (wages deflated with the consumer price index) is mediated not only by changes in the labour share, but also by changes in the relative prices of output and consumption goods, that is, labour's terms of trade.
Last year was a great year for Chile and Latin America in terms of trade," says Joydeep Mukherji, Director of Corporate Ratings at Standard & Poor's, a U.
There was a deteriorating trend in the terms of trade from the early 1990's until 2002, but the trend has subsequently been more stable (see Diagram 98).
South Korea's terms of trade continued to improve last month despite a large cut in exports as import prices dropped at a faster rate than export prices, central bank data showed Wednesday.
According to data, the Netherlands has topped the list of the EU countries in terms of trade exchange with Yemen in 2012 as it reached YR 236,1 billion; 231,9 were the value of Yemen's imports and YR 4,2 billion were the cost of Yemen's exports.