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Private Savings In Transition Economies: Are There Terms Of Trade Shocks?


  • Abdur R. Chowdhury



The paper examines the impact of terms of trade shocks on private savings in the transition economies after accounting for the effect of other determinants. Economic agents in the transition economies are subject to tight credit constraints which are more pronounced during bad state of nature. Thus, adverse shocks to commodity prices in the world market can force them to reduce savings by a larger amount than they would otherwise have. Empirical analysis using a dynamic panel model and data from twenty one transition economies confirm that most of the determinants of savings identified in the literature also apply to the transition economies. Favorable movements in both the permanent and transitory components of the terms of trade have a significant positive impact on private savings with transitory movements having a larger impact than the permanent component. This reflects the lack of access to foreign borrowing that many of the transition economies have faced during the last decade. Although the impact of terms of trade shocks are found to be asymmetric, the magnitude of the impact appears to be small. The results are robust for alternative estimators, determinants, and country groupings.

Suggested Citation

  • Abdur R. Chowdhury, 2003. "Private Savings In Transition Economies: Are There Terms Of Trade Shocks?," William Davidson Institute Working Papers Series 2003-572, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2003-572

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    Cited by:

    1. repec:mes:emfitr:v:53:y:2017:i:11:p:2585-2608 is not listed on IDEAS
    2. Chowdhury, Abdur, 2015. "Terms of trade shocks and private savings in the developing countries," Journal of Comparative Economics, Elsevier, vol. 43(4), pages 1122-1134.
    3. Tomasz Jasiński & Paweł Mielcarz, 2013. "Consumption as a Factor of Polish Economic Growth During the Global Recession of 2008/2009: A Comparison with Spain and Hungary," Contemporary Economics, University of Finance and Management in Warsaw, vol. 7(2), June.
    4. Roman Mogilevsky & Anara Omorova, 2011. "Assessing Development Strategies to Achieve the MDGs in Asia. Macroeconomic Strategies of MDG Achievement in the Kyrgyz Republic," CASE Network Reports 0095, CASE-Center for Social and Economic Research.
    5. Timo Baas, 2006. "Die Disparität der Sparquoten Ost- und Westdeutschlands: kann der spezifische ostdeutsche Transformationsprozess die Abweichung erklären?," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 75(4), pages 121-134.
    6. Merike Kukk & Karsten Staehr, 2015. "Macroeconomic factors in corporate and household saving. Evidence from Central and Eastern Europe," Bank of Estonia Working Papers wp2015-5, Bank of Estonia, revised 30 Dec 2015.

    More about this item


    transition; private savings; terms of trade;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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