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Financial Markets and International Risk Sharing

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  • Martin Schmitz

Abstract

Panel analysis of 20 industrial countries shows evidence for pro-cyclicality of capital gains on domestic stock markets - in particular over a medium term horizon. Thus, with cross-border ownership of portfolio equity investments, potential for international smoothing of domestic output fluctuations by means of the capital gains channel is found. Individual country analysis reveals substantial heterogeneity of cyclicality patterns. Evidence suggests that this cross-country variation can be explained by the level of economic development and the size of financial markets.

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File URL: http://hdl.handle.net/10.1007/s11079-008-9100-x
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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 21 (2010)
Issue (Month): 3 (July)
Pages: 413-431

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Handle: RePEc:kap:openec:v:21:y:2010:i:3:p:413-431

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Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: International risk sharing; Capital gains; Cross-border investment; Financial globalisation; Business cycle; F21; F30; G15;

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References

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Citations

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Cited by:
  1. Eleonora Pierucci & Luigi Ventura, 2011. "On international risk sharing and financial globalization: some gloomy evidence," Departmental Working Papers of Economics - University 'Roma Tre' 0124, Department of Economics - University Roma Tre.
  2. Philip R. Lane, 2008. "EMU and Financial Market Integration," The Institute for International Integration Studies Discussion Paper Series iiisdp248, IIIS.
  3. Schmitz, Martin, 2012. "Financial markets and international risk sharing in emerging market economics," Working Paper Series 1451, European Central Bank.
  4. Thierry Bracke & Martin Schmitz, 2011. "Channels of international risk-sharing: capital gains versus income flows," International Economics and Economic Policy, Springer, vol. 8(1), pages 45-78, April.
  5. Philip R. Lane, 2008. "EMU and Financial Integration," The Institute for International Integration Studies Discussion Paper Series iiisdp272, IIIS.
  6. Agustin Benetrix, 2010. "International Risk Sharing and the Irish Economy," The Institute for International Integration Studies Discussion Paper Series iiisdp343, IIIS.

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