In later years, the literature moved in two different directions. The Dutch Disease literature built on the tradable-non-tradable dichotomy And later Kent and Cashin (2003) extended this idea and showed that the duration or persistence of terms of trade shocks are important when determining the effect on an economy. A longer or more persistenceshock may result in lower investment and potentially higher saving in anticipation of lower future output. and concentrated on the sectoral impact of terms of trade shocks (see Corden, 1984, for a detailed survey). On the other hand, the intertemporal choice literature, following studies by Obstfeld (1982). Sachs (1981) and Svensson and Razin (1983), questioned the theoretical basis of the HLM effect and argued that in two-good models (imports and exports) household saving decisions should be from solutions to a dynamic optimization problem of selecting consumption and savings at different points in time. These studies concluded that the relationship between terms of trade and savings is sensitive to the duration of the terms of trade shocks. For instance, if improvements in the terms of trade are expected to be permanent, economic agents will revise upward their estimate of national income in current as well as future periods. In sharp contrast to the HLM effect, the higher level of income would lead to higher level of consumption with no effect on saving. On the other hand. If improvements are expected to be temporary, economic agents will smooth this wildfall gain over future periods by raising savings. Hence the hlm effect holds in the presence of only transitory terms of trade shock.