Document Type

Article

Publication Date

12-2004

Source Publication

Comparative Economic Studies

Source ISSN

0888-7233

Abstract

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 21 transition economies confirm that most of the determinants of savings identified in the literature also apply to the transition economies. The transitory component in the terms of trade have a larger positive impact than the permanent component. This reflects the lack of access to foreign borrowing. Although the impact of terms of trade shocks is found to be asymmetric, the magnitude of the impact appears to be small. The results are robust for alternative estimators, determinants and country groupings.

Comments

Accepted version. Comparative Economic Studies, Vol. 46, No. 4 (December 2004): 487-514. DOI. © Palgrave Macmillan 2004. Used with permission.