International Income Risk-Sharing and the Global Financial Crisis of 2008- 2009
Faruk Balli (),
Syed Basher () and
Hatice Balli ()
CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University
We examine the impact of the global financial crisis on the degree of international income and consumption risk-sharing among industrial economies using returns on cross-border portfolio holdings (e.g., debt, equity, FDI). We split the returns from the net foreign holdings as receipts (inflows) and payments (outflows) to investigate which of the two sides exhibited the greater resilience for income risk-sharing during the recent crisis. First, we find that debt delivered better risk-sharing than equity, mainly reflecting the deficit deterioration in EMU countries during the post-crisis period. FDI, by contrast, did not correspond to noticeable risk diversification. Second, separating output shocks into positive and negative components reveals that debt holding receipts (equity liability payments) performed better under negative (positive) realizations of the shock variable. Third, the unwinding of capital flows resulted in a sharp fall in income dis-smoothing via the debt liability channel in the new EU countries.
Keywords: Financial crisis; international portfolio diversification; income smoothing (search for similar items in EconPapers)
JEL-codes: F36 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13) Track citations by RSS feed
Downloads: (external link)
https://cama.crawford.anu.edu.au/sites/default/fil ... asher_balli_2013.pdf (application/pdf)
Journal Article: International income risk-sharing and the global financial crisis of 2008–2009 (2013)
Working Paper: International Income Risk-Sharing and the Global Financial Crisis of 2008--2009 (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2013-02
Access Statistics for this paper
More papers in CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Cama Admin ().