Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Uncertainty about the export earnings accruing to a country (sometimes referred to as export instability) is an important source of macroeconomic uncertainty in many developing countries. Theory predicts that countries should react to increases in this form of uncertainty by increasing their level of savings. The resulting asset accumulations would then act as the country’s insurance against the greater riskiness in its income stream. The paper tests this implication for a large sample of developing countries. In general, the results suggest that developing countries have indeed responded to increases in export instability by building up precautionary savings balances.

Balance of payments --- Consumption --- Current Account Adjustment --- Current account --- Economics --- Export earnings --- Exports and Imports --- Exports --- International economics --- International trade --- Macroeconomics --- Macroeconomics: Consumption --- National accounts --- Open Economy Macroeconomics --- Precautionary savings --- Saving and investment --- Saving --- Short-term Capital Movements --- Trade: General --- Wealth --- United States

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

In Bulgaria, Hungary, and Poland, the higher the relative household income is, the higher the savings rate is. But, surprisingly, savings rates appear to be unaffected by either sector of employment (public or private) or form of employment. Savings rates are significantly higher for households that do not own their own homes or that own few of the standard consumer durables - possibly because, with no retail credit or mortgage markets, households must save to purchase houses and durables; During the transition from central planning to market economies now under way in Eastern Europe, output levels first collapsed by 40 to 50 percent in most countries, then staged a modest recovery in the last two years. Longer-term revival of growth requires a resumption of investment and thus, realistically, of domestic savings. To explore the determinants of household savings rates in transition economies, Denizer, Wolf, and Ying studied matching household surveys for three Central European economies: Bulgaria, Hungary, and Poland. They find that savings rates strongly increase with relative income, suggesting that increasing income inequality may play a role in determining savings rates. Savings rates are significantly higher for households that do not own their homes or that own few of the standard consumer durables - possibly because, with no retail credit or mortgage markets, households must save to purchase houses and durables. The influence of demographic factors broadly matches earlier findings for developing countries. Perhaps surprisingly, variables associated with the household's position in the transition process - including either sector of employment (public or private) or form of employment - do not play a significant role in determining savings rates. This paper - a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Region - is part of a larger effort in the region to understand determinants of savings, at both the household and the aggregate level.

Bank --- Consumer --- Debt Markets --- Earnings --- Economic Theory and Research --- Emerging Markets --- Finance and Financial Sector Development --- Financial Literacy --- Future Income --- Household Expenditure --- Household Savings --- Income --- Incomes --- Lifetime --- Macroeconomics and Economic Growth --- Market Economies --- Poverty Reduction --- Precautionary Savings --- Private Sector Development --- Productivity --- Purchases --- Rapid Growth --- Retail Cred Savings Behavior --- Rural Development --- Rural Poverty Reduction --- Savings Rates --- Social Welfare --- Unemployment --- Wages

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Exporters of exhaustible resources have historically exhibited higher income volatility than other economies, suggesting a heightened role for precautionary savings. This paper uses a parameterized small open economy model to quantify the role of precautionary savings in economies with exhaustible resources, when the only source of uncertainty is the price of the exhaustible resource. Results show that the precautionary motive can generate sizable external sector savings. When aggregated over the sample countries, precautionary savings in 2006 add up to 3.2 percent of GDP. The quantitative importance of the precautionary motive varies considerably across the sample countries and is driven primarily by the weight of exhaustible resource revenues in future income. The parameterized model fares well at capturing current account balances in both cross-section and time-series data.

Business & Economics --- Economic History --- Saving and investment --- Nonrenewable natural resources --- Mathematical models. --- Econometric models. --- Non-renewable natural resources --- Exhaustible resources --- Natural resources, Nonrenewable --- Economic aspects --- Natural resources --- Exports and Imports --- Macroeconomics --- Natural Resources --- Nonrenewable Resources and Conservation: General --- Macroeconomics: Consumption --- Saving --- Wealth --- Current Account Adjustment --- Short-term Capital Movements --- Environmental management --- International economics --- Non-renewable resources --- Precautionary savings --- Current account --- Consumption --- Current account balance --- Balance of payments --- Economics --- Norway

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

A common assumption in standard economic models is that agents are risk-averse and prudent, and it is often argued that prudence is necessary to generate precautionary savings. This paper shows that prudence is not necessary to generate precautionary savings in small open economy models with more than two periods. A new class of preferences, which enables the isolation of the effect of risk aversion on precautionary savings, is introduced. The effects of changes in risk aversion, interest rates, and persistence and volatility of shocks on average asset holdings are qualitatively identical to the ones observed for standard constant-elasticity-of-substitution preferences. These results show that the almost universal assertion in the literature - that only prudent consumers can generate positive levels of precautionary savings - is simply incorrect.

Saving and investment --- Prices --- Accumulation, Capital --- Capital accumulation --- Capital formation --- Investment and saving --- Saving and thrift --- Capital --- Supply-side economics --- Wealth --- Investments --- Econometric models. --- Banks and Banking --- Exports and Imports --- Macroeconomics --- Macroeconomics: Consumption --- Saving --- International Finance: General --- Open Economy Macroeconomics --- Interest Rates: Determination, Term Structure, and Effects --- International Investment --- Long-term Capital Movements --- Finance --- International economics --- Precautionary savings --- Consumption --- Real interest rates --- Foreign assets --- National accounts --- Financial services --- External position --- Economics --- Interest rates --- Investments, Foreign --- Mexico

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Policymakers in oil-exporting countries confront the question of how to allocate oil revenues among consumption, saving, and investment in the face of high income volatility. We study this allocation problem in a precautionary saving and investment model under uncertainty. Consistent with data in the 2000s, precautionary saving is sizable and the marginal propensity to consume out of permanent shocks is below one, in stark contrast to the predictions of the perfect foresight model. The optimal investment rate is high if productivity in the tradable sector is high enough.

Exports --- Petroleum --- Saving and investment --- Accumulation, Capital --- Capital accumulation --- Capital formation --- Investment and saving --- Saving and thrift --- Capital --- Supply-side economics --- Wealth --- Investments --- Coal-oil --- Crude oil --- Oil --- Caustobioliths --- Mineral oils --- International trade --- Econometric models. --- Macroeconomics --- Production and Operations Management --- Macroeconomics: Consumption --- Saving --- Investment --- Intangible Capital --- Capacity --- Fiscal Policy --- Intertemporal Consumer Choice --- Life Cycle Models and Saving --- Aggregate Factor Income Distribution --- Macroeconomics: Production --- Income --- Consumption --- Income shocks --- Precautionary savings --- Productivity --- Economics --- Industrial productivity