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

26 Pages Posted: 15 Feb 2006

See all articles by Jonathan D. Ostry

Jonathan D. Ostry

International Monetary Fund (IMF)

Carmen M. Reinhart

Peter G. Peterson Institute for International Economics; National Bureau of Economic Research (NBER)

Date Written: October 1991

Abstract

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.

JEL Classification: E21, F32, F41, O10, O16, O53, O54, O55

Suggested Citation

Ostry, Jonathan D. and Reinhart, Carmen M., Private Saving and Terms of Trade Shocks: Evidence from Developing Countries (October 1991). IMF Working Paper, Vol. , pp. 1-26, 1991. Available at SSRN: https://ssrn.com/abstract=885094

Jonathan D. Ostry (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Carmen M. Reinhart

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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