Agenor, Pierre-RichardAizenman, Joshua2014-08-282014-08-282000-06https://hdl.handle.net/10986/19837The authors examine the extent to which permanent terms-of-trade shocks have an asymmetric effect on private savings. Using a simple three-period model, they show that if households expect to face binding constraints on borrowing in bad states of nature (when the economy is in a long trough rather than a sharp peak). Savings rates will respond asymmetrically to favorable movements in the permanent component of the terms of trade - in contrast with the predictions of conventional consumption-smoothing models. They test the asymmetric effects of terms-of-trade disturbances using an econometric model that controls for various standard determinants of private savings. The results - based on panel data for non-oil commodity exporters of Sub-Saharan Africa for 1980-96 (a group of countries for which movements in the terms of trade have traditionally represented a key source of macroeconomic shocks) - indicate that increases in the permanent component of the terms of trade (measured using three alternative filtering techniques) indeed tend to be associated with higher rates of private savings.en-USCC BY 3.0 IGOARBITRAGEASYMMETRIC SHOCKSBANK DEPOSITSBORROWINGBUDGET DEFICITSCAPITAL GOODSCAPITAL MARKETCAPITAL MARKETSCENTRAL GOVERNMENTSCOMMODITY EXPORTERSCONSUMERSCROSS- COUNTRY DATACROSS-COUNTRY REGRESSIONCROSS-SECTIONAL DATACURRENCYCURRENCY UNITSCURRENT ACCOUNTCURRENT ACCOUNT SURPLUSCURRENT EXPENDITURESDATA SETDEPENDENT VARIABLEDEVELOPING COUNTRIESDIMINISHING MARGINAL UTILITYDISSAVINGSDOMESTIC FINANCEDOMESTIC LIQUIDITYECONOMETRIC MODELECONOMIC GROWTHECONOMIC PERFORMANCEECONOMIC POLICYECONOMISTSEMPIRICAL EVIDENCEEMPIRICAL RESULTSEXPECTED UTILITYEXPECTED VALUEEXPENDITURESEXPLANATORY VARIABLESEXPORT PRICEEXPORTERSEXPORTSFINANCIAL DEVELOPMENTFINANCIAL LIBERALIZATIONFINANCIAL MARKETSFUNCTIONAL FORMGDP DEFLATORGNPGNP PER CAPITAGNP PER CAPITA GROWTH RATEGROSS DOMESTIC PRODUCTGROSS NATIONAL PRODUCTGROWTH RATEINCENTIVES TO SAVEINCOMEINCOME EFFECTINCOME SHOCKSINCOMESINDIVIDUAL COUNTRIESINFLATIONINFLATION RATELAGGED DEPENDENTLIQUIDITYLIQUIDITY CONSTRAINTSMACROECONOMIC EFFECTSMACROECONOMIC IMPLICATIONSMACROECONOMIC INSTABILITYMACROECONOMIC SHOCKSMACROECONOMIC VOLATILITYMACROECONOMICSMARGINAL UTILITYMEAN VALUENATIONAL DEFENSENEGATIVE EFFECTNEGATIVE IMPACTNEGATIVE SHOCKNEGATIVE WEALTHNET EXPORTSNOMINAL INTEREST RATESNON-OIL COMMODITYNON-OIL COMMODITY EXPORTERSOILOIL EXPORTERSOIL PRICEOIL PRICESPER CAPITA GROWTHPER CAPITA INCOMEPERMANENT INCOMEPERMANENT INCOME HYPOTHESISPOLICY RESEARCHPOOR COUNTRIESPOSITIVE EFFECTPOSITIVE RELATIONSHIPPOSITIVE SHOCKSPOVERTY REDUCTIONPRICE INDEXPRIVATE AGENTSPRIVATE SECTORPROPENSITY TO SAVEPUBLIC CONSUMPTIONPUBLIC SAVINGSPUBLIC SECTORREAL GDPREAL GNPREAL INCOMEREAL INTEREST RATEREGRESSION RESULTSREGRESSION TECHNIQUESRELATIVE IMPORTANCERELATIVE PRICE OF CAPITALRISK AVERSIONSAVINGSSAVINGS RATESSIGNIFICANT NEGATIVESOVEREIGN RISKTAX REVENUETERMS OF TRADETIME SERIESTRADE EFFECTSTRADE SHOCKSTRADE VARIABLESTRANSITORY SHOCKSTROUGHWEALTH10.1596/1813-9450-2381