Incomplete Intertemporal Consumption Smoothing and Incomplete Risksharing

Pierfederico Asdrubali and Soyoung Kim

International Finance from University Library of Munich, Germany

Abstract: This paper develops a method to estimate jointly the degree of (possibly incomplete) intertemporal consumption smoothing and the degree of (possibly incomplete) international/interregional risksharing. This approach generalizes and improves upon studies that either examine only intertemporal consumption smoothing, or analyze risksharing by making an extreme assumption on intertemporal consumption smoothing, or by adopting a purely empirical framework. The method is applied to the US states and OECD and EU countries to analyze how the degrees of risksharing and intertemporal consumption smoothing differ within a country and across countries. The empirical results suggest that: 1) regardless of the assumption on the degree of intertemporal consumption smoothing, the degree of risksharing within a country is larger than across countries 2) the degree of intertemporal consumption smoothing within a country is also larger than across countries, contrary to the findings of past channel studies. Finally, this paper also provides some foundations and suggests limitations of the empirical literature on channels of risksharing and intertemporal consumption smoothing.

Keywords: Intertemporal consumption smoothing; risksharing; channels of risksharing; international vs. intranational (search for similar items in EconPapers)
JEL-codes: E21 F36 F41 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2005-06-23
New Economics Papers: this item is included in nep-bec and nep-mac
Note: Type of Document - pdf; pages: 19
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Incomplete Intertemporal Consumption Smoothing and Incomplete Risk Sharing (2008)
Journal Article: Incomplete Intertemporal Consumption Smoothing and Incomplete Risk Sharing (2008)
Working Paper: Incomplete Intertemporal Consumption Smoothing and Incomplete Risksharing (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpif:0506010

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