The article explores how external and internal shocks affect international trade and finance. It looks at how different exchange rate systems impact households' savings and consumption in low-income countries. The study finds that under a floating exchange rate, assets help stabilize consumption, while under a pegged exchange rate, they stabilize imported consumption. Additionally, U.S. interest rate changes have varying effects on emerging market countries depending on the type of shock. Cost-push shocks lead to more significant volatility compared to natural rate shocks due to their characteristics.