Comovements in terms of trade volatility of land-abundant countries

Buenos Aires

Congreso; XLV Reunión Anual de la Asociación Argentina de Economía Política; 2010

Univ de Buenos Aires y Asociación Argentina de Economía Política

We conjecture that extreme land abundant endowment constitutes a structural restriction driving sectoral specialization and terms of trade volatility. We estimate and compare several volatility indicators for Argentina, Australia and New Zealand in 1870-2009 finding comovements, structural breaks in variability, significant cross correlations between TOT cycles, and in some cases heteroskedasticity. If land-abundance is a long-term structural restriction, development policies for this type of economies must balance reductions in TOT volatility through export diversification (at rising costs) and a combination of efficiency improvements and internal flexibility to manage volatility effects; if land-abundance is a long-term structural restriction, development policies for this type of economies must balance reductions in TOT volatility through export diversification (at rising costs) and a combination of efficiency improvements and internal flexibility to manage volatility effects.