WP 2014-12: Terms of Trade and Total Factor Productivity: Empirical evidence from Latin American emerging markets
WP 2014-12: Terms of Trade and Total Factor Productivity: Empirical evidence from Latin American emerging markets
WP 2014-12: Terms of Trade and Total Factor Productivity: Empirical evidence from Latin American emerging markets
N°
WP 2014-12
Title
Terms of Trade and Total Factor Productivity: Empirical evidence from Latin American emerging markets
Author(s)
Paul Castillo and Youel Rojas
Language
English
Date
2014/08/31
Abstract
In this paper we use quarterly data from Chile, Mexico and Peru to study the link between terms of trade and Total Factor Productivity (TFP). We estimate TFP using a stylized general equilibrium model for a small open economy model with quarterly data. Then, the TFP is decomposed into a domestic component and one external component linked to terms of trade using a structural VAR model as in Blanchard and Quah (1989). Our main results shows that the terms of trade has indeed not only short term but also medium and long term effects on TFP, being the short and medium term impact more predominant in the sample.