Are Industrial-Country Consumption Risks Globally Diversified?

Maurice Obstfeld

No 233194, Center for International and Development Economics Research (CIDER) Working Papers from University of California-Berkeley, Department of Economics

Abstract: What idiosyncratic consumption risks can counties trade away on international asset markets? This paper develops an empirical methodology for answering the question. The tests are based on the proposition that in an integrated world asset market with representative national agents, the ex post difference between two countries' intertemporal marginal rates of substitution in consumption is uncorrelated with any random variable on which contractual payoffs can be conditioned. This result is applied to annual time-series data for the seven largest industrial countries over 1950-88. Of these counties, Germany seems to have been most successful at internationally diversifying its consumption risks.

Keywords: International; Development (search for similar items in EconPapers)
Pages: 55
Date: 1993-03
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Citations: View citations in EconPapers (42)

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Working Paper: Are Industrial-Country Consumption Risks Globally Diversified? (1993)
Working Paper: Are Industrial-Country Consumption Risks Globally Diversified? (1993)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ucbewp:233194

DOI: 10.22004/ag.econ.233194

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