International consumption risk sharing

by Fabio Canova

Publisher: Centre for Economic Policy Research in London

Written in English
Published: Downloads: 100
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Edition Notes

StatementFabio Canova and Morten O. Ravn.
SeriesDiscussion paper series / Centre for Economic Policy Research -- No. 1074
ContributionsRavn, Morten Overgaard., Centre for Economic Policy Research.
ID Numbers
Open LibraryOL17430504M

The book [by Gabrielle Glaser] Her Best Kept Secret (Simon & Schuster ) reveals how alcohol has been systematically marketed to American women and how women are going to extremes to hide their excessive consumption. As a year-old healthy fitness professional who has no health problems, still runs for 75 minutes at least 5 days a week. Dec 01,  · Risk Sharing in International Economies and Market Incompleteness Gurdip Bakshi1, Mario Cerrato2, and John Crosby3 1University of Maryland, [email protected] 2Glasgow University, [email protected] 3Glasgow University and Grizzly Bear Capital, [email protected] First Draft, August December 1, Abstract We develop an Cited by: 1. the well known international consumption correlation puzzle. We endorse the explanation suggested by Stockman and Tesar () who argue that low consumption correlations are due to country specific taste shocks, and are consistent with considerable, even full, risk sharing. We claim, though, that our. 2 Executive summary International risk sharing focuses on the cross border channels which are at work in smoothing disposable income and consumption when a country is hit by a negative output shock. Indeed, in an ideal world of perfect risk sharing, countries are completely.

This paper estimates an empirical nonstationary panel regression model that tests long-run consumption risk sharing across a sample of OECD and emerging market (EM) countries. This is in contrast to the existing literature on consumption risk sharing, which is mainly about risks at business cycle frequency. international risk sharing could be very large (Van Wincoop, ). The marginal utility of consumption is, however, not observable. To as-sess the degree of international risk sharing based on aggregate consumption, one needs to make specific assumptions about individual’s utility function. The Gains from International Risk-Sharing Keith Sill is a senior economist in the Research Department of the Philadelphia Fed. Our economy has become increasingly global. We import and export more than ever before. Yet, three facts about international financial transactions, when taken together, pose a puzzle. First, financial capital moves. International Risk Sharing and Low Cross-Country Consumption Correlations: Are They Really Inconsistent? 1. Introduction In equilibrium models ofinternational trade dynamics, it is commonly assumed that asset markets.

Banks, Financial Markets and International Consumption Risk Sharing Markus Leibrecht Johann Scharlery October Abstract In this paper we empirically explore how characteristics of the domestic nancial system in uence the international allocation of consumption risk using a . Risk-sharing in a currency union takes place mainly through the savings (also referred to as credit) channel (international credit markets), the capital markets channel (cross-border ownership of assets), and fiscal transfers between (member) the5thsense.com-sharing results in more efficient shock absorption through (interspatial) income and (intertemporal) consumption smoothening. international consumption risk sharing. However, while international gross holdings have indeed exploded, the empirical evidence for better interna-tional risk sharing seems – at least at first sight – inconclusive. In this paper I review the extant literature and seek to identify the factors that lead dif-. Jun 03,  · International risk-sharing is usually defined as a situation where fluctuations in consumption are decoupled from idiosyncratic fluctuations in output, and where consumption growth rates across countries are highly correlated. The disconnect between consumption and output is of course made possible by lending to, and borrowing from, abroad.

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The Impact of International Portfolio Composition on Consumption Risk Sharing Article in Journal of International Money and Finance 31(6) · November with 18 Reads How we measure 'reads'.

INTERNATIONAL ECONOMIC REVIEW Vol. 37, No. 3, August INTERNATIONAL CONSUMPTION RISK SHARING* BY FABIO CANOVA AND MORTEN 0. RAVN1 This paper formally examines the implications of international consumption risk sharing for a panel of industrialized countries.

We theoretically derive the. Assessing the degree of international consumption risk sharing (English) Abstract. This paper examines the extent of consumption risk sharing for a group of 50 high-income and developing countries.

The analysis is based on the empirical implementation of a model of partial consumption insurance whose parameters have the natural interpretation Cited by: 1.

Get this from a library. Assessing the Degree of International Consumption Risk Sharing. [Constantino Hevia; Luis Servan] -- This paper examines the extent of consumption risk sharing for a group of 50 high-income and developing countries. The analysis is based on the empirical implementation of a.

International risk-sharing has far-reaching implications both for economic policy and for basic research in economics. When countries do not share risk, individuals in those countries experience fluctuations in their consumption levels that are undesirable and possibly unnecessary.

This paper extends and refines the study of international risk. 'Consumption risk sharing' refers to the ability of agents to insure or protect their consumption against shocks to their income, for example, by borrowing and lending or holding claims on foreign equity.

So measuring the extent of risk sharing informs us about how consumption is likely to respond to country or region-specific shocks to income. This paper studies international risk sharing in Ireland focusing on the period.

To this end, we assess how consumption and national income have been affected by idiosyncratic output the5thsense.com: Yossi Yakhin. In this paper, we contribute to the international consumption risk sharing literature by accounting for the role of foreign equity portfolio composition in international consumption risk sharing.

First, we argue that it is not the size of foreign portfolio equity investment as a fraction of domestic equity wealth alone that provides risk the5thsense.com by: 6. But empirical studies indicate that consumption is much less correlated across countries than output.

In other words, there isn’t much international risk sharing in terms of consumption. Explanations of the consumption correlation puzzles emphasize a variety of market. This paper examines the extent of consumption risk sharing for a group of 50 high-income and developing countries.

The analysis is based on the empirical implementation of a model of partial consumption insurance whose parameters have the natural interpretation of coefficients of partial risk sharing even when the 0 hypothesis of perfect risk sharing is rejected.

functions, consumption growth rates – will not be equalised internationally. But the link between the two biases need not necessarily hold: ex-post risk sharing in consumption can be duplicated through ex-ante consumption smoothing behaviour without international trade in equities.

For. International Consumption Risk Is Shared After All: An Asset Return View Karen K. Lewis, Edith X. Liu. NBER Working Paper No. Issued in February NBER Program(s):Asset Pricing Program, Economic Fluctuations and Growth Program, International Finance and Macroeconomics Program International consumption risk sharing studies have largely ignored their models' counterfactual.

Downloadable. 'Consumption risk sharing' refers to the ability of agents to insure or protect their consumption against shocks to their income, for example, by borrowing and lending or holding claims on foreign equity.

So measuring the extent of risk sharing informs us about how consumption is likely to respond to country or region-specific shocks to income. that states in the US have achieved a considerable level of risk sharing. Kim et al. () use a data series from the Penn World Table between and to estimate the degree of consumption risk sharing.

They analyze two channels for consumption risk sharing among 10 East Asian countries: Indonesia, Malaysia, the. large, uninsurable effects on relative wealth. In other words, large swings in international prices magnify the consumption risk of fundamental supply shocks, generating large departures from efficient risk sharing.

As a result, the predicted correlation between the RER and relative con-sumption is negative. Downloadable. Recent empirical work has shown that ongoing international financial integration facilitates cross-country consumption risk-sharing. These studies typically find that countries with high equity home bias exhibit relatively low international consumption risk sharing.

We extend this line of research and demonstrate that it is not only a country’s equity home bias that. in regional and international risk sharing.

While bank lending and borrowing is important in regional risk sharing (see e.g. Hoffmann and Shcherbakova-Stewen,and the literature surveyed therein), the role of cross-border credit in general (Sørensen and Yosha, ) and bank loans for international risk sharing appears to be limited.

On the other hand, while we find no evidence that financial integration, as measured by cross-border capital flows in terms of the ratio of foreign assets to GDP, is helpful in consumption risk sharing in SSA, equity appears to hold the potential of precipitating a reduction in consumption risk while foreign direct investment (FDI) and debt are.

This paper examines the extent of risk sharing for a group of 50 industrial and developing countries. The analysis is based on a model of partial consumption insurance whose parameters have the natural interpretation of coefficients of partial risk sharing even when the null hypothesis of Cited by: 1.

Banks, Financial Markets and International Consumption Risk Sharing Markus Leibrecht Johann Scharlery December 7, Abstract In this paper we empirically explore how characteristics of the domestic nancial system in uence the international allocation of consumption risk using a sample of OECD countries.

international asset trade and international risk sharing. Despite the massive increase in cross-border asset trade since the ’s, consumption risk sharing across countries remains limited. In standard international business cycle models, e cient risk sharing requires that consumption should be higher in the country where it is cheaper to.

this study to analyse the evolution of international consumption risk sharing over the time and spectral dimensions simultaneously. Section IV presents and discusses the empirical results of the study, contrasting the outcomes of a time series versus wavelet based analysis of consumption growth correlations and the implications of international.

Nov 27,  · International consumption risk sharing studies often generate counterfactual implications for asset return behavior with potentially misleading results. We address this contradiction using data moments of consumption and asset returns to fit a canonical international consumption risk sharing framework.

Introducing persistent consumption risk, we find that its correlation across countries is Cited by: 1 Introduction. Is consumption risk optimally hedged across countries. Despite the development of international financial markets in the last decades, the answer from a large body of financial and macroeconomic research appears to be "no".

1 While the literature has analyzed many different facets of (the lack of) international risk sharing, a crucial testable implication is that, in a world.

models with time separable preferences and international financial markets that are incomplete, because just a riskless bond can be traded internationally.3 The focus of the paper here (efficient risk sharing, consumption-real exchange rate co-movements and related open economy stylized facts) is different.

Our measure indicates that international risk sharing has been improving over time, a finding consistent with theory and intuition. Existing methods are well designed to test the null hypothesis of perfect risk sharing, but they are poorly suited to gauge the degree of international risk sharing once the null is Cited by: What Do International Asset Returns Imply About Consumption Risk-Sharing.

(Preliminary and Incomplete) KAREN K. LEWISy EDITH X. LIUz June 10, Abstract An extensive literature has examined the potential risk-sharing gains from international. standing these economies' risk sharing patterns is of considerable interest.1 The objective of this paper is to study the impact of financial globalization on the degree of international consumption risk sharing for a large set of industrial and developing countries.

In particular, we. May 05,  · In theory, globalization should enhance risk sharing by making it easier for individuals to diversify insurable risks—those that are minimized by sharing in large groups.

Residents of different countries get the opportunity to trade financial asse. Evaluating International Consumption Risk Sharing Gains: An Asset Return View KAREN K. LEWISy EDITH X. LIUz October, Abstract Multi-country consumption risk Cited by: source of overall international consumption risk sharing remains saving.

The remainder of the paper is laid out as follows. Section 2 outlines the basic theory of perfect risk sharing and our way of measuring the degree of risk sharing from various channels. Sec-tion 3 discusses our econometric approach while Section 4 presents the empirical.Moreover, the pattern of consumption risk sharing is related to the degree of financial openness: countries with more open capital accounts, and larger stocks of foreign assets and liabilities exhibit larger degrees of risk the5thsense.com by: 1.