Financial Intermediation, International Risk Sharing, and Reserve Currencies

Matteo Maggiori

American Economic Review, 2017, vol. 107, issue 10, 3038-71

Abstract: I model the equilibrium risk sharing between countries with varying financial development. The most financially developed country takes greater risks because its financial intermediaries deal with funding problems better. In good times, the more financially developed country consumes more and runs a trade deficit financed by the higher financial income that it earns as compensation for taking greater risk. During global crises, it suffers heavier losses. Its currency emerges as the reserve currency because it appreciates during crises, thus providing a good hedge. I provide evidence that financial net worth plays a crucial role in understanding this asymmetric risk sharing.

JEL-codes: E44 F14 F32 G01 G15 G21 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/aer.20130479
References: Add references at CitEc
Citations: View citations in EconPapers (151)

Downloads: (external link)
https://www.aeaweb.org/articles?id=10.1257/aer.20130479 (application/pdf)
https://www.aeaweb.org/content/file?id=5464 (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... M_yDRA5QocVwdooI-a16 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... CO3eqRVHe5J8xy7yidhp (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Financial Intermediation, International Risk Sharing, and Reserve Currencies (2013)
Working Paper: Financial Intermediation, International Risk Sharing, and Reserve Currencies (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:107:y:2017:i:10:p:3038-71

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().