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Saving and Terms of Trade Shocks: Evidence from Developing Countries

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Reinhart, Carmen
Ostry, Jonathan

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Abstract

The relationship between temporary terms of trade shocks and household saving in developing countries is examined. It is first shown that, from a theoretical standpoint, this relationship is ambiguous: private saving may rise or fall in response to a transitory terms of trade shock, depending on the values of the intertemporal elasticity of substitution and the intra temporal elasticity of substitution between traded and nontraded goods. Empirical estimates of these two parameters are obtained using data from a sample of 13 developing countries, and then used to draw implications for the response of private saving to transitory terms of trade shocks.

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File URL: http://mpra.ub.uni-muenchen.de/6976/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6976.

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Date of creation: Sep 1992
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Publication status: Published in IMF Staff Papers 3.39(1992): pp. 495-517
Handle: RePEc:pra:mprapa:6976

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Related research
Keywords: saving; consumption; interteporal; preference parameters; term of trade;

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Find related papers by JEL classification:
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
F0 - International Economics - - General
E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment

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  1. Karlygash Kuralbayeva & David Vines, 2008. "Shocks to Terms of Trade and Risk-premium in an Intertemporal Model: The Dutch Disease and a Dutch Party," Open Economies Review, Springer, vol. 19(3), pages 277-303, July. [Downloadable!] (restricted)
  2. Lutz Kilian & Alessandro Rebucci & Nikola Spatafora, 2007. "Oil Shocks and External Balances," Working Papers 562, Research Seminar in International Economics, University of Michigan. [Downloadable!]
    Other versions:
  3. Michael A. Kouparitsas, 1996. "North-South financial integration and business cycles," Working Paper Series, Macroeconomic Issues WP-96-10, Federal Reserve Bank of Chicago. [Downloadable!]
  4. O Okiti, 2003. "A Dynamic General Equilibrium Model with Terms of Trade Shocks: A Small Open Economy Case," The School of Economics Discussion Paper Series 0333, Economics, The University of Manchester. [Downloadable!]
  5. Patrick Honohan, 1995. "The Impact of Financial and Fiscal Policies on Saving," Papers WP059, Economic and Social Research Institute (ESRI). [Downloadable!]
  6. Kodama, Masahiro, 2006. "Business Cycles of Non-mono-cultural Developing Economies: The Case of ASEAN Countries," IDE Discussion Papers 52, Institute of Developing Economies, Japan External Trade Organization(JETRO). [Downloadable!]
  7. Karlygash Kuralbayeva, 2007. "Inflation persistence: Implications for a design of monetary policy in a small open economy subject to external shocks," CEIS Research Paper 93, Tor Vergata University, CEIS. [Downloadable!]
  8. Michael B. Devereux & Gregor W. Smith, 2005. "Transfer Problem Dynamics: Macroeconomics of the Franco-Prussian War Indemnity," Working Papers 1025, Queen's University, Department of Economics. [Downloadable!]
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  9. Kivilcim Metin-Ozcan, 2002. "Determinants of Private Saving Behaviour in Turkey," Departmental Working Papers 0206, Bilkent University, Department of Economics. [Downloadable!]
  10. Reinhart, Carmen & Wickham, Peter, 1994. "Commodity Prices: Cyclical Weakness or Secular Decline?," MPRA Paper 8173, University Library of Munich, Germany. [Downloadable!]
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  11. Christian M. Oberpriller, 2007. "Global Current Account Imbalances and Exchange Rate Adjustment: The Role of Oil Suppliers Valuation Effects and Interest Rate Changes," Kiel Advanced Studies Working Papers 442, Kiel Institute for the World Economy. [Downloadable!]
  12. Junko Koeda, 2006. "A Debt Overhang Model for Low-Income Countries: Implications for Debt Relief," IMF Working Papers 06/224, International Monetary Fund. [Downloadable!]
  13. Kuralbayeva, Karlygash & Vines, David, 2006. "Terms of Trade Shocks in an Intertemporal Model: Should We Worry about the Dutch Disease or Excessive Borrowing?," CEPR Discussion Papers 5857, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  14. Amartya Lahiri, 1996. "Disinflation Programs Under Policy Uncertainty: Insights for Exchange-Rate-Based Stabilization Programs," UCLA Economics Working Papers 761, UCLA Department of Economics. [Downloadable!]
  15. Firdu Gmech, 2006. "The Mckinnon-Shaw Hypothesis: Thirty Years on:A Review of Recent Developments in Financial Liberalization Theory," Working Papers id:537, esocialsciences.com. [Downloadable!]
  16. Juha Tervala, 2007. "Fiscal Policy and the Current Account in a Small Open Economy," Finnish Economic Papers, Finnish Economic Association, vol. 20(2), pages 108-120, Autumn. [Downloadable!]
  17. Benoît Carmichael & Sikoro Keita & Lucie Samson, 1999. "Liquidity Contraints and Business Cycles in Developing Economies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(2), pages 370-402, April. [Downloadable!] (restricted)
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  18. Floro, Maria & Seguino, Stephanie, 2002. "Gender effects on aggregate saving: A theoretical and empirical analysis," MPRA Paper 6541, University Library of Munich, Germany, revised Dec 2000. [Downloadable!]
  19. Carmen M. Reinhart & R. Todd Smith, 2001. "Temporary Controls on Capital Inflows," NBER Working Papers 8422, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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