Risk sharing and portfolio allocation in EMU

Yuliya Demyanyk, Charlotte Ostergaard and Bent Sorensen

No 334, European Economy - Economic Papers 2008 - 2015 from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: This paper investigates whether risk sharing, measured as income and consumption smoothing, among countries in the EU and the European Economic and Monetary Union (EMU) has increased since the adoption of the euro. We ask: Have the recent increase in foreign equity and debt holdings been associated with more risk sharing? Do certain classes of assets (debt, equity, foreign direct investment) provide relatively more or less risk sharing? Do liabilities provide risk sharing differently from assets? Do investments in EMU countries provide more or less risk sharing per euro invested compared to investments in non-EMU countries? Has increased banking integration improved risk sharing? Due to the short span of years since the introduction of the euro, our results are tentative, but they indicate that the monetary union has facilitated risk sharing, although the level of risk sharing is still much below the level found among U.S. states.

Keywords: Financial integration; Risk sharing; EU; EMU; Portfolio diversification; Banking market integration; Panel data analysis; Demyanyk; Ostergaard; Sörensen (search for similar items in EconPapers)
JEL-codes: C23 F36 G15 G21 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2008-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecopap:0334

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