In a previous post I showed estimates that traditional measures of terms of trade South Africa’s terms of trade have risen meaningfully over the last two decades. Alternative measures suggest that South Africa’s term of trade boom might have been much more modest than standard measures of terms of trade otherwise suggest.
Commodity terms of trade measures the windfall gains and losses of income associated with changes in global commodity prices. Estimates from the IMF suggest that South Africa’s terms of trade are back to 2000 levels and never jumped nearly as much as for Australia or Canada.
It is worth noting that how one weights commodities for each country when constructing terms of trade indices has a meaningful impact on the measures obtained. These charts are based on time-varying weights which help to capture changes in the trade mix and relative importance of commodities in a country’s economic output. Indices based on net export weights have experienced much larger variations over time according to the IMF estimates.