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Incomplete Intertemporal Consumption Smoothing and Incomplete Risk Sharing

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  • PIERFEDERICO ASDRUBALI
  • SOYOUNG KIM

Abstract

This paper develops a method to estimate jointly the degree of intertemporal consumption smoothing and the degree of "inter-regional" risk sharing. The empirical results for the U.S. states and OECD and EU countries suggest that: (i) regardless of the assumption on the degree of intertemporal consumption smoothing, the degree of risk sharing within a country is larger than across countries; (ii) the degree of intertemporal consumption smoothing within a country is also larger than across countries; and (iii) the difference between the degree of intertemporal consumption smoothing within U.S. states and across OECD and EU countries is as large as the difference between the degree of risk sharing, contrary to the findings of some past studies. Copyright (c) 2008 The Ohio State University.

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Bibliographic Info

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 40 (2008)
Issue (Month): 7 (October)
Pages: 1521-1531

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Handle: RePEc:mcb:jmoncb:v:40:y:2008:i:7:p:1521-1531

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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Citations

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Cited by:
  1. Asdrubali, Pierfederico & Kim, Soyoung, 2009. "Consumption smoothing channels in open economies," Journal of Banking & Finance, Elsevier, vol. 33(12), pages 2293-2300, December.
  2. Andrea Colciago & Tiziano Ropele & V. Anton Muscatelli & Patrizio Tirelli, 2008. "The Role of Fiscal Policy in a Monetary Union: are National Automatic Stabilizers Effective?," Review of International Economics, Wiley Blackwell, vol. 16(3), pages 591-610, 08.
  3. Kurosaki, Takashi, 2011. "Vulnerability of Household Consumption to Village-level Aggregate Shocks in a Developing Country," PRIMCED Discussion Paper Series 8, Institute of Economic Research, Hitotsubashi University.
  4. Alessandro Federici & Pierluigi Montalbano, 2012. "Macroeconomic volatility, consumption behaviour and welfare: A cross-country analysis," Working Paper Series 3612, Department of Economics, University of Sussex.
  5. Alun H. Thomas & Tamim Bayoumi, 2009. "Today versus Tomorrow: The Sensitivity of the Non-Oil Current Account Balance to Permanent and Current Income," IMF Working Papers 09/248, International Monetary Fund.

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