Financial Reforms and Low-Income Households’ Impact on International Consumption Risk Sharing

Malin Gardberg

No 1261, Working Paper Series from Research Institute of Industrial Economics

Abstract: Complete financial markets allow countries to share their consumption risks internationally, thereby creating welfare gains through lower volatility of aggregate consumption. Using a panel of 116 countries between 1970–2019, I show that a higher share of low-income households reduce consumption risk sharing, especially so in less-developed countries. Moreover, I find that a broad range of financial market reforms and financial integration have a positive impact on international consumption risk sharing in poorer developing countries, while in emerging market countries, financial market development, financial reforms, and capital account openness has an impact. In advanced economies, financial (stock and bond) market development as well as financial integration improves international risk sharing. A lack of financial reforms, a lower degree of financial integration and a high share of low-income households thus contribute to the degree of risk sharing being lower in developing countries than in advanced economies.

Keywords: International consumption risk sharing; Financial liberalization; Financial integration; Low-income Households (search for similar items in EconPapers)
JEL-codes: C23 E02 E21 E44 F38 F62 G15 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2019-01-31, Revised 2022-06-30
New Economics Papers: this item is included in nep-fdg, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Financial reforms and low‐income households' impact on international consumption risk sharing (2022)
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