Conventional measures of terms of trade show a strong increase in South Africa’s terms of trade over the last two decades. It is useful to assess differences between the level of export and import prices, when prices are expressed based on actual price levels. As we showed in this paper, real exchange rates are affected by terms of trade effects when measured using cross-country price levels. Today’s post compares relative prices (benchmarked relative to those of the United States) for major BRICS countries and shows that South Africa’s relative terms of trade have been the most favourable among major BRICS economies, although the improvement in South Africa’s terms of trade of trade has been much more modest than if measured using indices.
