Capital market integration and consumption risk sharing over the long run

Jesper Rangvid, Pedro Santa-Clara and Maik Schmeling

Journal of International Economics, 2016, vol. 103, issue C, 27-43

Abstract: We empirically investigate time variation in capital market integration and consumption risk sharing using data for 16 countries from 1875 to 2012. We show that there has been considerable variation over time in the degrees of capital market integration and consumption risk sharing and that higher capital market integration forecasts more consumption risk sharing in the future. This finding is robust to controlling for trade openness and exchange rate volatility as alternative drivers of risk sharing. Finally, we calculate the welfare costs of imperfect consumption risk sharing and find that these costs vary over time, line up with variation in risk sharing, and are quite substantial during periods of low risk sharing.

Keywords: Market integration; Consumption risk sharing; Long-run international data (search for similar items in EconPapers)
JEL-codes: E44 F21 F36 G12 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:103:y:2016:i:c:p:27-43

DOI: 10.1016/j.jinteco.2016.08.001

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