SOME REFLECTIONS ON THE TERMS OF TRADE

Abstract

In my article I have taken up different expressions for the terms of trade in foreign trade, and especially I have been interested in a breakdown of total gain into two parts, namely the part due to the terms‐of‐trade effects and the part due to the price level effects. I have also taken up the inter‐sectoral gain from terms of trade and the relation to the terms of trade in foreign trade. Besides the usual index for terms of trade‐the ratio between output prices and input prices‐I have also introduced another index for terms of trade corresponding to the relation between the output price index and an index consisting of a weighted average of input prices and prices for final demand. Finally I have tried to give some emperical findings which should throw light on the development of the Danish terms of trade for the period 1949 to 1964.