Growth Uncertainty and Risksharing

Stefano G. Athanasoulis and Eric van Wincoop

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: How large are potential benefits from global risksharing? In order to answer this question we propose a new methodology that is closely connected with the empirical growth literature. We obtain estimates of residual risk (growth uncertainty) at various horizons from regressions of country-specific growth in deviation from, world growth on a wide set of variables in the information set. Since this residual risk can be entirely hedged through risksharing, we use it to obtain a measure of the potential welfare gain'for' a representative country. We find that nations can reap very large benefits from, engaging in such risksharing arrangements.

Date: 1997-02-01
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genstf:199702010800001039

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