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Intertemporal Substitution and Terms-of-Trade Shocks

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  • Paul Cashin
  • C. John McDermott

Abstract

The paper examines the relationship between transitory terms-of-trade shocks and private saving. Using a model allowing for nonseparability between the consumption of tradables and nontradables, the paper estimates the intertemporal elasticity of substitution while accounting for the intratemporal elasticity of substitution between the consumption of tradables and nontradables. Empirical analysis of data for five industrial countries indicates that in response to transitory terms-of-trade shocks, intertemporal substitution of consumption and intratemporal substitution of consumption between tradables and nontradables both have large effects on private saving. Copyright Blackwell Publishing Ltd 2003.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 11 (2003)
Issue (Month): 4 (09)
Pages: 604-618

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Handle: RePEc:bla:reviec:v:11:y:2003:i:4:p:604-618

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Citations

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Cited by:
  1. Olivier Cardi & Romain Restout, 2007. "Permanent vs Temporary Fiscal Expansion in a Two-Sector Small Open Economy Model," Working Papers, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure 0720, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  2. Romain Restout, 2008. "Monopolistic Competition and the Dependent Economy Model," EconomiX Working Papers 2008-9, University of Paris West - Nanterre la Défense, EconomiX.
  3. Olivier CARDI & Romain RESTOUT, 2011. "Fiscal Shocks in a Two-Sector Open Economy," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 2011006, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  4. Olivier Cardi & Romain Restout, 2013. "Imperfect Mobility Of Labor Across Sectors: A Reappraisal Of The Balassa-Samuelson Effect," Working Papers of BETA 2013-04, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  5. Paul Segal, 2012. "Natural Resource Wealth and Directed Technical Change," OxCarre Working Papers, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford 088, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  6. Paul Cashin & Samya Beidas-Strom, 2011. "Are Middle Eastern Current Account Imbalances Excessive?," IMF Working Papers 11/195, International Monetary Fund.
  7. Olivier CARDI & Romain RESTOUT, 2010. "Sectoral Effects of Tax Reforms in an Open Economy," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 2010045, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  8. Romain Restout, 2009. "The Balassa-Samuelson model in general equilibrium with markup variations," EconomiX Working Papers 2009-39, University of Paris West - Nanterre la Défense, EconomiX.

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