A CRITICAL REVIEW OF RECENT DEBATE

After the publication of some long period data on terms of trade of primary products by Grilli and Yang(1988), a new debate started- whether the terms of trade seriesfollowed a deterministic path of decline or not. This paper critically examines this debate and concludes that the new series supports thePrebisch-Singer hypothesis. The terms of trade of primary products vis-a-vis manufactures have a statistically significant declining trend over the period, 1900-86 and the eruption of debt crisis in the 1980s accentuated the situation. This is a deterministic trend, not simply the permanent effect of a temporary shock.