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Working Paper

Relative Price Movements In Dynamic General Equilibrium Models Of International Trade

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We examine the behavior of international relative prices from the perspective of dynamic general equilibrium theory, with particular emphasis on the variability of the terms of trade and the relation between the terms of trade and net exports. We highlight aspects of the theory that are critical in determining these properties, contrast our perspective with those associated with the Marshall-Lerner condition and the Harberger-Laursen-Metzler effect, and point out features of the data that have proved difficult to explain within existing dynamic general equilibrium models.
11.01.1992ISSN 2573-7953 WP 92-13DOI 10.26509/frbc-wp-199213

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Backus, David, Patrick J. Kehoe, and Finn Kydland. 1992. “Relative Price Movements In Dynamic General Equilibrium Models Of International Trade.” Federal Reserve Bank of Cleveland, Working Paper No. 92-13. https://doi.org/10.26509/frbc-wp-199213