Intertemporal Substitution and Terms-of-Trade Shocks

The paper examines the relationship between transitory terms‐of‐trade shocks and private saving. Using a model allowing for nonseparability between the consumption of tradables and nontradables, the paper estimates the intertemporal elasticity of substitution while accounting for the intratemporal e...

Full description

Saved in:
Bibliographic Details
Published in:Review of international economics 2003-09, Vol.11 (4), p.604-618
Main Authors: Cashin, Paul, McDermott, C. John
Format: Article
Language:English
Subjects:
Consumption
Data analysis
Economic models
Economic shock
Economic theory
Economics
Industry
Manycountries
Savings
Statistical analysis
Studies
Terms of trade
Trade
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:The paper examines the relationship between transitory terms‐of‐trade shocks and private saving. Using a model allowing for nonseparability between the consumption of tradables and nontradables, the paper estimates the intertemporal elasticity of substitution while accounting for the intratemporal elasticity of substitution between the consumption of tradables and nontradables. Empirical analysis of data for five industrial countries indicates that in response to transitory terms‐of‐trade shocks, intertemporal substitution of consumption and intratemporal substitution of consumption between tradables and nontradables both have large effects on private saving.
ISSN:0965-7576
1467-9396
DOI:10.1111/1467-9396.00406