Testing for Consumer Risk-Pooling in the Open Economy – further Results

Patrick Minford (), Zhirong Ou () and Zheyi Zhu ()
Additional contact information
Patrick Minford: Cardiff University
Zhirong Ou: Cardiff University
Zheyi Zhu: Cardiff Metropolitan University

Open Economies Review, 2025, vol. 36, issue 3, No 7, 920 pages

Abstract: Abstract In this supplement to Minford et al. Int J Financ Econ 26(2):19932021 (2021), we revisit the ‘puzzle’ in open economy studies that evidence of international risk-sharing is hardly seen despite active cross-country financial markets. We reassess both risk-pooling via state-contingent bonds, and uncovered interest parity – both were believed to be different, and spuriously rejected, in previous work – in the context of a full DSGE model of the New Keynesian type. We prove that the two models are identical, both analytically and numerically. When tested as part of such a full DSGE model by indirect inference which circumvents the bias of single-equation tests, we find universal evidence of international risk-sharing.

Keywords: Consumer risk-pooling; UIP; Two-country DSGE model; Indirect inference test (search for similar items in EconPapers)
JEL-codes: C12 E12 F41 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11079-024-09782-5 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
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:kap:openec:v:36:y:2025:i:3:d:10.1007_s11079-024-09782-5

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11079/PS2

DOI: 10.1007/s11079-024-09782-5

Access Statistics for this article

Open Economies Review is currently edited by G.S. Tavlas

More articles in Open Economies Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().