International risk sharing in overlapping generations models

Staveley-O’Carroll, James and Staveley-O’Carroll, Olena M.
Authors registered in the RePEc Author Service: James Staveley-O'Carroll

Economics Letters, 2019, vol. 174, issue C, 157-160

Abstract: We propose a way to address the Backus–Smith puzzle that, instead of relying on extreme parameter values or complex modeling assumptions, simply switches the framework from infinitely lived agents to overlapping generations. Young agents face nondiversifiable wage risk that leads to a low degree of risk sharing within each country. Subsequently, international price movements are not sufficient to achieve the high consumption-real exchange rate correlation produced in standard infinitely lived agent DSGE models.

Keywords: Backus–smith; International portfolio choice; Overlapping generations; Risk sharing (search for similar items in EconPapers)
JEL-codes: D52 F21 F41 G11 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: International Risk Sharing in Overlapping Generations Models (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:174:y:2019:i:c:p:157-160

DOI: 10.1016/j.econlet.2018.10.030

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