RDP 2013-10: Stochastic Terms of Trade Volatility in Small Open Economies
Equation (15)
C
t
−
σ
P
t
=
φ
t
j
[
1
−
ϕ
2
(
I
t
j
−
I
t
−
1
j
I
t
−
1
j
)
2
−
ϕ
I
t
j
I
t
−
1
j
(
I
t
j
−
I
t
−
1
j
I
t
−
1
j
)
]
+
β
E
t
[
φ
t
+
1
j
ϕ
(
I
t
+
1
j
I
t
j
)
2
(
I
t
+
1
j
−
I
t
j
I
t
H
)
]
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