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The impact of terms of trade and macroeconomic regimes on private saving

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  • Grigoli, Francesco
  • Herman, Alexander
  • Schmidt-Hebbel, Klaus

Abstract

In this paper we present novel findings on private saving behavior. Relying on the largest available world database, we find that higher terms of trade (TOT) raise saving, and this effect is much larger for temporary TOT shocks. When credit constraints are less binding, the marginal effect of higher TOT on private saving is lessened. Accelerations in TOT growth and larger TOT volatility raise private saving. While adopting fiscal rules and floating exchange rate regimes yields no effect on private saving, introducing an inflation targeting regime reduces private saving, possibly by lessening the need for precautionary saving.

Suggested Citation

  • Grigoli, Francesco & Herman, Alexander & Schmidt-Hebbel, Klaus, 2016. "The impact of terms of trade and macroeconomic regimes on private saving," Economics Letters, Elsevier, vol. 145(C), pages 172-175.
    • Handle: RePEc:eee:ecolet:v:145:y:2016:i:c:p:172-175
    DOI: 10.1016/j.econlet.2016.06.020
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    References listed on IDEAS

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    1. Mr. Xavier Debrun & Mr. Manmohan S. Kumar, 2007. "The Discipline-Enhancing Role of Fiscal Institutions: Theory and Empirical Evidence," IMF Working Papers 2007/171, International Monetary Fund.
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    4. Svensson, Lars E.O., 2010. "Inflation Targeting," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 22, pages 1237-1302, Elsevier.
    5. Alejandro Izquierdo & Randall Romero & Ernesto Talvi, 2008. "Booms and Busts in Latin America: The Role of External Factors," Research Department Publications 4569, Inter-American Development Bank, Research Department.
    6. Mr. Francesco Grigoli & Alexander Herman & Klaus Schmidt-Hebbel, 2014. "World Saving," IMF Working Papers 2014/204, International Monetary Fund.
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    Cited by:

    1. Ignacio Hernando & Irene Pablos & Daniel Santabárbara & Javier Vallés, 2018. "Private saving. New cross-country evidencebased on bayesian techniques," Working Papers 1802, Banco de España.

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    More about this item

    Keywords

    Consumption; Private saving; Terms of trade; Fiscal rules; Inflation targeting; Exchange rate regime;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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