Are Industrial-Country Consumption Risks Globally Diversified?

Maurice Obstfeld

No 4308, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: What idiosyncratic consumption risks can countries trade away on international asset markets? This paper develops an empirical methodology for answering the question. The tests are based on the proposition that in an integrated world asset market with representative national agents, the ex post difference between two countries' intertemporal marginal rates of substitution in consumption is uncorrelated with any random variable on which contractual payoffs can be conditioned. This result is applied to annual time-series data for the seven largest industrial countries over 1950-88. Of these countries, Germany seems to have been most successful at internationally diversifying its consumption risks.

JEL-codes: F36 G15 (search for similar items in EconPapers)
Date: 1993-03
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (145)

Forthcoming in Leonardo Leiderman and Assaf Razin, eds., Capital Mobility Cambridge, UK, Cambridge University Press, 1994

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Related works:
Working Paper: Are Industrial-Country Consumption Risks Globally Diversified? (1993)
Working Paper: Are Industrial-Country Consumption Risks Globally Diversified? (1993)
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