Terms of trade and economic growth in a world of constrained capital mobility
How to cite this publication:
Hildegunn Kyvik Nordås (1997). Terms of trade and economic growth in a world of constrained capital mobility. Bergen: Chr. Michelsen Institute (CMI Working Paper WP 1997:5)
This paper focuses on the interaction between world community and capital markest within the framework of an extended neoclassical growth model. The model incorporates raw materials as an essential input and captures the observed, but hithherto unexplained impact of terms of trade on economic growth. It is shown that in a world of declining real prices of industrial raw materials, the steady state growth rate is an increasing function of the input ratio raw materials/unskilled labour. When international capital flows are constrained, the speed of convergence is determined by the same variables.
