Kauppaehdot

Kauppaehdot, often translated as terms of trade, refers to the ratio between a country's export prices and its import prices. It is typically expressed as an index number, where the base year is assigned a value of 100. An increase in the terms of trade signifies that a country's exports have become more expensive relative to its imports, meaning it can afford to buy more imports for the same amount of exports. Conversely, a decrease indicates that exports have become cheaper relative to imports.

Several factors influence a country's terms of trade. Commodity prices play a significant role, especially for countries that are major exporters or importers of raw materials. Fluctuations in global demand and supply for these commodities directly impact their prices and, consequently, the terms of trade. Exchange rates also affect the terms of trade. A depreciation of a country's currency can make its exports cheaper for foreign buyers, potentially improving the terms of trade if import prices remain stable or rise less. Conversely, an appreciation of the currency can make exports more expensive and imports cheaper.

Changes in the terms of trade can have substantial economic implications. An improvement generally benefits a country by increasing its purchasing power, allowing for higher living standards or greater investment. It can lead to a trade surplus or a reduction in a trade deficit. However, a deterioration in the terms of trade can strain an economy, making it more expensive to import necessary goods and potentially leading to a trade deficit or worsening an existing one. For developing countries heavily reliant on primary commodity exports, volatile terms of trade can create economic instability.