International Consumption Risk Sharing with Incomplete Goods and Asset Markets

Sven Blank ()

No 4.2, Working Paper / FINESS from DIW Berlin, German Institute for Economic Research

Abstract: Perfect consumption risk sharing requires both, frictionless goods as well as frictionless financial market integration. This project aims at analyzing the consequences of both type of frictions for the allocation of risk across countries in a unified framework. To this end, the theoretical model by Ghironi and Melitz (2005) is extended to allow for trade in international equities. This setup incorporates impediments to international trade in goods and assets. Preliminary results indicate that both type of frictions matter for international consumption risk sharing.

Keywords: International portfolio choice; consumption risk sharing; trade frictions; financial market frictions (search for similar items in EconPapers)
JEL-codes: F32 F42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-opm
Date: 2009
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Persistent link: http://EconPapers.repec.org/RePEc:diw:diwfin:diwfin04020

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