Terms of trade is an important indicator of the welfare gains from international trade to the exporting country. Terms of trade of oil-exporting countries are hypothesized to depend primarily on oil prices. The study assesses the relation between oil prices and the terms of trade of Saudi Arabia. The study uses the Autoregressive Distributed Lag method to determine the cointegration between the country’s terms of trade and oil prices for the period 2000-2018. The data for net barter terms of trade is taken from World Development Indicators and oil price is taken from Saudi Arabian Monetary Agency. The results show that oil prices and terms of trade are cointegrated and any disequilibrium between the two variables is corrected by 35% in a year. The study also reports a positive relationship between the two items, both in the short run and long run. Diagnostic tests indicate the model to be fit. The results suggest that, for a primarily oil-producing country like Saudi Arabia, the terms of trade depend on oil prices. The study fills the gap in the literature on the study of terms of trade for Saudi Arabia for the last few years, where there has been a high volatility in oil prices.

This paper estimates the impact of terms of trade(TOT) on economic growth and inflation for seven Asian countries. We find that for China, India, Indonesia, Malaysia, Pakistan, Philippines, the deterioration of TOT can promote economic growth. In the case of the improvement of TOT, the domestic price tends to decrease in Philippines and Turkey. In contrast, CPI in countries such as China, India, Indonesia, Malaysia and Pakistan rises because of the improvement of TOT. According to the results which are based on the VEC model, we can conclude when the TOT of China, Indonesia, Pakistan and Philippines is not so appropriate from the long-run equilibrium, the economy can also turn back to the equilibrium by error correction process. And there are statistically nonsignificant trends toward the influence of long-terms economic balance to real GDP per capita of India and Malaysia. As for the situation of CPI in India and Pakistan, when TOT is impacted, the economy can still turn back to the equilibrium by error correction process. But the adjustment coefficient of China, Philippines and Turkey is not so significant in statistics.