Common correlated effects and international risk sharing

Peter Fuleky, Luigi Ventura and Qianxue Zhao

No 2013-3R, Working Papers from University of Hawaii Economic Research Organization, University of Hawaii at Manoa

Abstract: Existing studies of risk pooling among groups of countries are predicated upon the highly restrictive assumption that all countries have symmetric responses to aggregate shocks. We show that the conventional risk sharing test fails to isolate idiosyncratic fluctuations within countries and produces spurious results. To avoid these problems, we propose an alternative form of the risk sharing test that is robust to heterogeneous country characteristics. In our empirical example, we provide estimates using the proposed approach for various groupings of 158 countries.

Keywords: Panel data; Cross-sectional dependence; International risk sharing; Consumption insurance (search for similar items in EconPapers)
JEL-codes: C23 C51 E21 F36 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2013-03, Revised 2013-08
New Economics Papers: this item is included in nep-cba, nep-ias, nep-opm and nep-rmg
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https://uhero.hawaii.edu/wp-content/uploads/2019/08/WP_2017-5R.pdf First version, 2013 (application/pdf)

Related works:
Journal Article: Common correlated effects and international risk sharing (2018)
Working Paper: Common correlated effects and international risk sharing (2017)
Working Paper: Common correlated effects and international risk sharing (2016)
Working Paper: Common Correlated Effects and International Risk Sharing (2016)
Working Paper: Common correlated effects and international risk sharing (2013)
Working Paper: Common Correlated Effects and International Risk Sharing (2013)
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