Document Type
Unpublished Paper
Language
eng
Format of Original
35 p.
Publication Date
2003
Publisher
Bank of Finland Institute for Economies in Transition
Source Publication
BOFIT Discussion Papers 3/2003
Source ISSN
1456-4564
Abstract
This paper examines whether terms of trade shocks have an asymmetric effect on private savings in transition economies. A simple three-period framework is developed to show that, in the presence of binding credit constraints in bad states of nature, savings rates can be sensitive to favorable movements in the permanent component of the terms of trade. This result contrasts with the prediction of the conventional consumption-smoothing model. Empirical analysis with a dynamic panel model further confirms that while favorable movements in the permanent component of the terms of trade have an asymmetric effect on private savings, the magnitude of the effect is relatively small. The results are robust for alternative estimators, determinants, and country groupings.
Recommended Citation
Chowdhury, Abdur, "Do Asymmetric Terms of Trade Shocks Affect Private Savings in a Transition Economy?" (2003). Economics Faculty Research and Publications. 485.
https://epublications.marquette.edu/econ_fac/485
Comments
Published version.BOFIT Online, No. 3 (2003). Publisher Link.© 2003 BOFIT. Used with permission.