Commodity trade and international risk sharing : How much do financial markets matter?
AbstractThis paper evaluates the gains from international risk sharing in some simple general-equilibrium models with output uncertainty. Under empirically plausible calibration, the Incremental loss from a ban on international portfolio diversification is estimated to be quite small--0.15 percent of output per year is a representative figure. Even the theoretical gains from asset trade may disappear under alternative sets of assumptions on preferences and technology. The paper argues that the small magnitude of potential trade gains, when coupled with small costs of cross-border financial transactions, may explain the apparently inconsistent findings of empirical studies on the degree of international capital mobility.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Monetary Economics.
Volume (Year): 28 (1991)
Issue (Month): 1 (August)
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Web page: http://www.elsevier.com/locate/inca/505566
Other versions of this item:
- Harold L. Cole & Maurice Obstfeld, 1991. "Commodity Trade and International Risk Sharing: How Much Do Financial Markets Matter?," NBER Working Papers 3027, National Bureau of Economic Research, Inc.
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- International Risk Sharing: Through Equity Diversification or Exchange Rate Hedging?
by Martin Berka in NEP-OPM blog on 2009-10-28 01:07:50
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