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Do private capital markets insure regional risk? Evidence from the United States and Europe

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  • Andrew Atkeson
  • Tamim Bayoumi

Abstract

A striking feature of international economic relations is the limited extent of intertemporal trade and risk-sharing among nations. This paper uses data on consumption, income, and production from regions of the United States to address the question of whether the limited participation of national economies in international capital markets is a fundamental aspect of economic relations among large geographic regions, or whether it is specifically an artifact of international economic relations. We conclude that capital flows among the regions of the United States are significantly larger than those across countries. However, such private markets still provide a relatively limited degree of insurance against regional fluctuations. Copyright Kluwer Academic Publishers 1993

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File URL: http://hdl.handle.net/10.1007/BF01000047
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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 4 (1993)
Issue (Month): 3 (September)
Pages: 303-324

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Handle: RePEc:kap:openec:v:4:y:1993:i:3:p:303-324

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

Related research

Keywords: capital markets; regional fluctuations;

References

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  1. Mace, Barbara J, 1991. "Full Insurance in the Presence of Aggregate Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 928-56, October.
  2. Christopher D. Carroll & Lawrence H. Summers, 1991. "Consumption Growth Parallels Income Growth: Some New Evidence," NBER Chapters, in: National Saving and Economic Performance, pages 305-348 National Bureau of Economic Research, Inc.
  3. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1991. "International real business cycles," Staff Report 146, Federal Reserve Bank of Minneapolis.
  4. Baxter, Marianne & Crucini, Mario J, 1993. "Explaining Saving-Investment Correlations," American Economic Review, American Economic Association, vol. 83(3), pages 416-36, June.
  5. Cochrane, John H, 1991. "A Simple Test of Consumption Insurance," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 957-76, October.
  6. Alan C. Stockman & Linda L. Tesar, 1995. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements," NBER Working Papers 3566, National Bureau of Economic Research, Inc.
  7. Bayoumi, Tamim A. & Rose, Andrew K., 1993. "Domestic savings and intra-national capital flows," European Economic Review, Elsevier, vol. 37(6), pages 1197-1202, August.
  8. Portes, Richard, 1989. "Macroeconomic Policy Coordination and the European Monetary System," CEPR Discussion Papers 342, C.E.P.R. Discussion Papers.
  9. Townsend, R.M., 1991. "Risk and Insurance in Village India," University of Chicago - Economics Research Center 91-3, Chicago - Economics Research Center.
  10. Harberger, Arnold C, 1980. "Vignettes on the World Capital Market," American Economic Review, American Economic Association, vol. 70(2), pages 331-37, May.
  11. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-29, June.
  12. Paul Masson & Jacques Melitz, 1991. "Fiscal policy independence in a European Monetary Union," Open Economies Review, Springer, vol. 2(2), pages 113-136, June.
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