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International Risk Sharing in the Short Run and in the Long Run

Marianne Baxter ()

No 16789, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: International risk-sharing has far-reaching implications both for economic policy and for basic research in economics. When countries do not share risk, individuals in those countries experience fluctuations in their consumption levels that are undesirable and possibly unnecessary. This paper extends and refines the study of international risk-sharing in two dimensions. First, this paper investigates risk-sharing at short vs. long horizons. Countries might, for example, pool risks associated with high-frequency shocks (e.g., seasonal fluctuations in crop yields) but might not share risks associated with low frequency shocks (e.g., different long-run national growth rates). Second, this paper studies bilateral risk-sharing, which is different from the approach taken in most previous studies. We find that there is evidence of substantial international risk-sharing at medium and low frequencies. There is evidence of high and increasing risk-sharing within Europe that is not apparent for other regions of the world.

JEL-codes: E2 E21 E32 F11 F15 F2 F4 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ias, nep-ifn and nep-mac
Date: 2011-02
Note: IFM
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Published as Marianne Baxter, 2012. "International risk-sharing in the short run and in the long run," Canadian Journal of Economics/Revue canadienne d'économique, vol 45(2), pages 376-393.

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