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Common correlated effects and international risk sharing

Peter Fuleky, Luigi Ventura () and Qianxue Zhao ()
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Qianxue Zhao: Department of Economics, University of Hawaii at Manoa

No 2017-5R, Working Papers from University of Hawaii Economic Research Organization, University of Hawaii at Manoa

Abstract: Correct assessment of consumption risk and its international diversification has important policy implications. However, existing studies of international risk sharing rely on the unrealistic assumptions that all economies are characterized by symmetric preferences and uniform transmission of global shocks. We relax these homogeneity constraints and compare our proposed approach with the conventional ones using a 44-year panel of 120 countries. Our results confirm that consumption is only partially smoothed internationally and risk sharing is directly related to the level of development, but we do not detect a significant increase in risk sharing during the surge in financial globalization over the last four decades.

Keywords: International risk sharing; Consumption insurance; Panel data; Cross-sectional dependence; Heterogeneous effects (search for similar items in EconPapers)
JEL-codes: C23 C51 E21 F36 (search for similar items in EconPapers)
Date: 2013-03, Revised 2017-05
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http://www.uhero.hawaii.edu/assets/WP_2017-5R.pdf First version, 2013 (application/pdf)

Related works:
Journal Article: Common correlated effects and international risk sharing (2018) Downloads
Working Paper: Common correlated effects and international risk sharing (2016) Downloads
Working Paper: Common Correlated Effects and International Risk Sharing (2016) Downloads
Working Paper: Common correlated effects and international risk sharing (2013) Downloads
Working Paper: Common correlated effects and international risk sharing (2013) Downloads
Working Paper: Common Correlated Effects and International Risk Sharing (2013) Downloads
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