Gustavo Adler, Nicolas Magud, 04 July 2013

Commodity exporters have been both blessed and cursed by the boom-and-bust nature of commodity-price and demand swings. This column presents a new metric that computes the additional income arising from changes in the real purchasing value of output as a result of changes in relative prices. Focusing on Latin America, it’s clear that although its recent terms-of-trade boom is of similar magnitude to that seen in the 1970s, the associated income windfall has been much larger. The current weakening of external current-account balances in Latin America – even if driven by higher domestic investment – warrants close monitoring.

CEPR Policy Research