Trends, cycles and asymmetries in the terms of trade of primary commodities from developed and less developed countries

The paper examines the Prebisch hypothesis that primary product prices relative to the price of manufacturers fall during cyclical downturns by more than they rise during cyclical upturns and that this is an independent explanation of the secular tendency of the net barter terms of trade to move against primary commodities. An important distinction is made between primary products exported by less developed countries and those exported by developed countries. The greater cyclicality of primary product prices, and the long-run deterioration in their terms of trade since 1954 are confirmed, but there is little support for the Prebisch thesis that primary product prices relative to manufacturers are move sensitive on the downswing than the upswing.