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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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
6976.
Length: Date of creation: Sep 1992 Date of revision: Publication status: Published in IMF Staff Papers 3.39(1992): pp. 495-517 Handle: RePEc:pra:mprapa:6976
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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Lutz Kilian & Alessandro Rebucci & Nikola Spatafora, 2007.
"Oil Shocks and External Balances,"
Working Papers
562, Research Seminar in International Economics, University of Michigan.
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