ABSTRACT

A New Approach to the Evolution o f Primary Commodity Terms o f Trade and the Implications fo r Developing Countries

INTRODUCTION

On the basis of compilations by Nguyen (1981) and Diakosavas and Scandizzo (1991), it appears that about three-quarters of the voluminous empirical work that exists on the barter terms of trade between primary commodities and manu­ factured goods indicates a long-term non-favourable movement for primary commodity prices. These results have been obtained from studies which aim at proving or disproving the existence of a time trend in the data, thus implying a gradually improving or worsening course in the relative prices along a determin­ istic time trend path. In this case, economic forces are assumed to exist which ‘push’ the terms of trade to follow a continuously improving or worsening course, with deviations from this deterministic path being temporary in nature.