Terms of trade shocks and private savings in the developing countries

Developing countries suffer from terms of trade shocks. * These shocks affect the savings rate in the country. * Transitory component of terms of trade shocks have a greater impact on savings than the permanent component. * Most of the determinants of savings identified in the literature also applies to the developing countries. Economic agents in the developing countries 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 o... Mehr ...