June 2000 - When households face the possibility of borrowing constraints in bad times, favorable movements in the permanent component of the terms of trade may lead to higher rates of private savings. Agénor and Aizenman examine the extent to which permanent terms-of-trade shocks have an...

A positive historical shock to external spreads can lead to an increase in domestic spreads and a reduction in the cyclical component of output. Shocks to external spreads immediately after the Mexican peso crisis had a sizable effect on movements in output and domestic interest rate spreads in...

This paper examines the extent to which permanent terms-of-trade shocks have an asymmetric effect on private savings. The first part uses a simple three-period model to show that, if households expect to face binding borrowing constraints in bad states of nature, savings rates will respond...

A positive historical shock to external spreads can lead to an increase in domestic spreads and a reduction in the cyclical component of output. Shocks to external spreads immediately after the Mexican peso crisis had a sizable effect on movements in output and domestic interest rate spreads in...