Private Savings in Transition Economies: Are there Terms of Trade Shocks?

Abstract

Economic agents in the transition economies 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 otherwise have. Empirical analysis using a dynamic panel model and data from 21 transition economies confirm that most of the determinants of savings identified in the literature also apply to the transition economies. The transitory component in the terms of trade have a larger positive impact than the permanent component. This reflects the lack of access to foreign borrowing. Although the impact of terms of trade shocks is found to be asymmetric, the magnitude of the impact appears to be small. The results are robust for alternative estimators, determinants and country groupings.

Households Savings and Financial Behavior in Relation to the Ability to Handle Financial Emergencies: Case Study of Kosovo

“…In general, savings can be defined as money that is not spent at the moment, because people usually save so they can buy more later. Without savings, households find it more difficult to have a secure financial situation in extraordinary situations [Chowdhury 2004].…”