portfolios away from domestic capital and into foreign bonds. The reallocation of precautionary savings from domestic to foreign … significant precautionary savings associated with terms of trade risk. Opening foreign bond markets in the model induces a shift …

fall in response to a transitory terms of trade shock, depending on the values of the intertemporal elasticity of …

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 asymmetric effect on private savings. Using a simple three-period model, they … long trough rather than a sharp peak), savings rates will respond asymmetrically to favorable movements in the permanent …