This paper analyzes the effects of both a permanent and a temporary deterioration In the terms of trade on a small open economy. The model, based on intertemporal optimization, emphasizes the labor-leisure choice and the role of capital accumulation There are two main conclusions to be drawn...

This paper analyzes the effects of both a permanent and a temporary deterioration In the terms of trade on a small open economy. The model, based on intertemporal optimization, emphasizes the labor-leisure choice and the role of capital accumulation There are two main conclusions to be drawn...

The effect of terms of trade economy on the welfare of a small open economy is analyzed. It exports a homogeneous good and imports some brands of the differentiated good. It also produces some brands of the differentiated good which are not traded. A term of trade deterioration causes resources...