Terms-of-Trade Shocks and Economic Fluctuations in Developing Economies——Based on SVAR Analysis of 53 Countries
In recent years,the international situation and trade cooperation have undergone profound changes unseen.Strengthening and promoting South-South cooperation becomes a severe challenge for all developing economies.Compared with the steady improvement of the terms-of-trade of developed and developing countries have experienced continuous nega-tive impacts in recent years,posing a risk of impoverishing growth.Based on macroeconomic data from 53 developing countries spanning from 1980 to 2020,this paper investigates the effect of the terms-of-trade shocks on the macroeconomic fluctuations of developing countries.Firstly,although both the production-side GDP and expenditure-side GDP fall under the expenditure approach of the national income accounting sys-tem,there is a significant difference between them when measuring economic activities in developing countries.The difference mainly stems from the terms of trade between developing and developed countries.Secondly,the terms-of-trade shock can ex-plain 40％of the macroeconomic fluctuations in developing countries when using the expenditure-side rather than production-side GDP and considering monetary and fiscal policies.Thirdly,the macroeconomic policies of developing coun-tries often present an abnormal phenomenon regarding procyclical adjustment,mainly due to the government's choices of ex-pansionary monetary and fiscal policies to deal with the adverse effects of the pressure of domestic currency appreciation on ex-ports.This paper explains the significant differences between theoretical models and empirical analysis from a new perspective and provides important policy insights for relying on"South-South trade"to achieve mutual benefits for developing countries.Firstly,as passive recipients of international prices,developing countries should pay more attention to expenditure-side GDP,representing the actual welfare level of the country's residents.Secondly,China should promote the"Belt and Road"initiative and strive to create a trade environment that could mitigate the impacts of a series of terms-of-trade shocks for developing countries.Thirdly,relying solely on adopting expansionary monetary and fiscal policies to promote exports is far from sufficient for developing countries to achieve long-term stable economic development.Instead,developing countries should employ suit-able macroeconomic policies to stabilize the economic cycle based on specific terms of trade.
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