Rise in terms of trade not always inflationary: RBA paper
Increases in the terms of trade tend to be expansionary but are not always inflationary, with the exchange rate providing an effective buffer to external shocks that move the terms of trade, according to a Reserve Bank of Australia (RBA) paper published on Thursday.
Jarkko Jääskelä and Penelope Smith, the paper's authors, quantify the macroeconomic effects of different types of terms of trade shocks and their propagation in the Australian economy. They identify three types of shocks: a world
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