Private Saving and Terms of Trade Shocks: Evidence From Developing Countries

By Jonathan David Ostry, Carmen Reinhart

October 1, 1991

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Jonathan David Ostry, and Carmen Reinhart. Private Saving and Terms of Trade Shocks: Evidence From Developing Countries, (USA: International Monetary Fund, 1991) accessed November 12, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the relationship between temporary terms of trade shocks and household saving in developing countries. 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 intratemporal 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.

Subject: Consumption, Financial services, Imports, International trade, National accounts, Private savings, Real interest rates, Terms of trade

Keywords: Africa, Aggregate consumption good, Aggregate price deflator, Asia and Pacific, Consumption, Consumption-smoothing effect, Discount factor, Imports, Private savings, Real interest rates, Terms of trade, Terms of trade shock, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1991/100
Stock No:

WPIEA1001991
ISBN:

9781451852318
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 39, No. 3, September 1992.

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