Terms of trade and output fluctuations in Colombia

This paper explores the impact of the terms of trade on output fluctuations in
Colombia, a developing country where as much as 62% of export earnings come
from just four commodities: oil (42%), coal (14%), coffee (5%), and nickel (1%). This
research was prompted by: the particular role of short-run fluctuations in developing
economies, the fact that the Colombian terms of trade are procyclical, and the
discussion on economic policies towards sterilization of the effects of commodity
prices. Following time series analysis for the period 1994 -2011, robust evidence was
found indicating that around one third of Colombia's quarterly growth is attributable
to changes in the terms of trade.