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How is a country affected by changes in the world price of commodities that it exports and imports?

Terms-of-Trade Effect

Determines the effect of a change in the world price of a commodity on the value of a country's exports and imports as a percent of GDP.

Data Requirements

  • Value of exports and imports of a commodity
  • Proportional change in world price of exports and imports over time
  • GDP

i commodity
xi value of export i
mi value of import i
Δ pi / pi proportional change in the world price of export or import i, depending on if it is preceded by x (exports) or m (imports).
GDP gross domestic product of the country

The analysis can be applied to individual commodities or to broad categories.


Estimates a percentage effect on GDP from a change in world commodity prices.