Home Bias and the Structure of International and Regional Business Cycles

Michael Artis and Mathias Hoffmann

No ECO2003/15, Economics Working Papers from European University Institute

Abstract: We estimate Shiller portfolio weights for OECD countries and US states. We find that the income of US federal states is derived to about 50 percent from own output, that of OECD countries to about 60 percent.This suggests that US states display considerable ’home bias at home’ and that the international portfolio home bias may be relatively less severe than evidence based on models of optimal portfolio allocation would suggest. We relate the estimated portfolio weights to the structure of regional and international business cycles. In particular, we can reproduce the empirical evidence on inter-state and international income flows.

Keywords: Consumption Risk Sharing; International and regional business cycles; Capital flows; Home Bias; Non-stationary panel data (search for similar items in EconPapers)
JEL-codes: C23 E21 F36 (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-ifn and nep-mac
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Citations: View citations in EconPapers (1)

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