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Adjustment, including in labour markets, to trade opening and trade shocks can be significant.
Almost every country in Latin America has been hit by trade shocks.
Despite the ruts, few wanted to trade shocks or knobby tires for speed.
It is important that affected countries have in place mechanisms to assist those adversely affected by trade shocks.
Mortgages gone bad and lax regulation in America can cause trade shocks that threaten emerging markets busy trying to employ billions of people.
Protect vulnerable producers from trade shocks: The problems we see in highly protected markets like bananas, sugar and rum – where historically some developed countries granted preferences to some developing countries while excluding others – are apparent now these markets are opening up.
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"We found that the trade shock had a very measurable impact on the employment rate.
Not only does such a terms of trade shock not call for tighter monetary policy, it is essential to rebalancing.
High inflation and low wage growth, painful as they are, are necessary for Americans to adjust to the fact that they are facing a "terms of trade" shock: relative to their trading partners, their standard of living must go down.
"Into mid-2009, withethe global economy in recession and dollar commodity prices lower, Australia will experience its most significant negative terms of trade shock in many decades (albeit from a highly stimulatory position)," he added in a research note.
In economists' jargon, higher commodity prices are a sort of trade shock for consuming countries and, however you spin it, the effect is always bad.Stockmarkets don't seem to have reflected too much on the impact of higher commodity prices so far, perhaps because dire warnings of the impact of high oil prices have not yet translated into economic calamity.
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