Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212517 
Year of Publication: 
2003
Series/Report no.: 
BOFIT Discussion Papers No. 3/2003
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
This paper examines whether terms of trade shocks have an asymmetric effect on private savings in transition economies.A simple three-period framework is developed to show that, in the presence of binding credit constraints in bad states of nature, savings rates can be sensitive to favorable movements in the permanent component of the terms of trade.This result contrasts with the prediction of the conventional consumption-smoothing model.Empirical analysis with a dynamic panel model further confirms that while favorable movements in the permanent component of the terms of trade have an asymmetric effect on private savings, the magnitude of the effect is relatively small.The results are robust for alternative estimators, determinants, and country groupings.
Subjects: 
transition
private savings
terms of trade
JEL: 
F10
E21
P33
Persistent Identifier of the first edition: 
ISBN: 
951-686-854-1
Document Type: 
Working Paper

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