World betas, consumption growth, and financial integration

Borja Larrain ()

Journal of International Money and Finance, 2011, vol. 30, issue 6, 999-1018

Abstract: We define a country's beta as the covariance of domestic consumption growth with world consumption growth scaled by the world's variance. Beta is related to a country's risk-taking position in models of international financial integration. Empirically, we find that an increase in beta leads to an increase in average consumption growth. This beta-growth relationship is present only among countries with high levels of financial openness, and is absent among the rest. However, we cannot fully discard the presence of non-financial factors (e.g., trade openness) as determinants of the beta-growth relationship.

Keywords: Financial; integration; International; risk-sharing; Risk-taking; Consumption; growth (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:30:y:2011:i:6:p:999-1018

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