Risk sharing of disaggregate macroeconomic and idiosyncratic shocks

Gregory D. Hess () and Kwanho Shin ()

No 9915, Working Paper from Federal Reserve Bank of Cleveland

Abstract: Comparing the degree to which idiosyncratic and disaggregate macro shocks (such as regional and industry shocks) are not shared in the economy provides greater understanding of why the economy lacks risk-sharing arrangements in specific areas and can suggest areas where the economy’s risk-sharing capability could be enhanced. The authors find that a negligible amount of risk (around 10 percent) is shared in the aggregate, about 50 percent is shared within regions and industries, while the remaining 40 percent is not shared with other households. These findings suggest that given the low level of international risk sharing, greater international integration may not increase international risk sharing significantly.

Keywords: Risk (search for similar items in EconPapers)
Date: 1999
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Working Paper: Risk Sharing of Disaggregate Macroeconomic and Idiosyncratic Shocks (1999)
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