Investigation relationship between Terms of trade shocks and private savings in Iran

Investigation factors affecting the savings is one of the issues that has been noted in developed and the developing countries in recent studies. The main Purpose of this paper is to examine the relationship between trade shocks and private savings per capita in the Iran’s country between the years 1963 to 2015. Therefore, the models have been estimated using the GMM and OLS method. In order to enter trade shocks in the model was used standard Hodrick–Prescott (HP) filter. With this filter separated trade shocks (terms of trade) permanent and temporary shocks and is analyzed their effects on per capita private savings. The results of the model estimation show that savings previous period and trade shocks have a significant effect on savings so that these variables explained 78 percent of variance in savings. The estimation results suggest that the trade shocks have positive effect on savings and fluctuations in the terms of trade have a negative effect on savings. Temporary shocks have a greater effect on the savings to permanent component.