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International dynamic risk sharing Author info | Abstract | Publisher info | Download info | Related research | Statistics Giuseppe Cavaliere (Department of Statistical Sciences, University of Bologna, Bologna, Italy)
Luca Fanelli (Department of Statistical Sciences, University of Bologna, Bologna, Italy)
Attilio Gardini (Department of Statistical Sciences, University of Bologna, Bologna, Italy)
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In this paper we examine the implications of international risk sharing among a set of countries in the presence of market frictions which complicate the instantaneous adjustment to the first-order conditions. We suggest approximating the consumption streams of countries belonging to the risk sharing coalition in terms of a disequilibrium dynamic model embodying forward-looking adjustment. Econometric methods for estimating and testing the model are discussed. Empirical analysis of a set of core European countries suggests that once preference parameters are allowed to vary across countries, we are able to identify a group of nations that share risks against idiosyncratic permanent income shocks. The equilibrium position, however, is reached after a long adjustment period. Copyright © 2008 John Wiley & Sons, Ltd.
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics .
Volume (Year): 23 (2008)
Issue (Month): 1 ()
Pages: 1-16
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Handle: RePEc:jae:japmet:v:23:y:2008:i:1:p:1-16Contact details of provider: Web page: http://www.interscience.wiley.com/jpages/0883-7252/
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