Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/243477 
Year of Publication: 
2020
Series/Report no.: 
Research Papers in Economics No. 10/20
Publisher: 
Universität Trier, Fachbereich IV - Volkswirtschaftslehre, Trier
Abstract: 
The import and export price indices of an economy are usually compiled by some Laspeyres type index. It is well known that such an index formula is prone to substitution bias. Therefore, also the terms of trade (ratio of export and import price index) are likely to be distorted. The underlying substitution bias accumulates over time. The present paper introduces a simple and transparent retrospective correction approach that removes the substitution bias and produces meaningful long-run time series of import and export price levels and, therefore, of the terms of trade. Furthermore, an empirical case study is conducted that demonstrates the efficacy and versatility of the correction approach.
Subjects: 
distortion
official statistics
terms of trade
time series
Document Type: 
Working Paper

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