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Nominal Revaluation of Cross-Border Assets, Terms-of-Trade Changes, International Portfolio Diversification, and International Risk Sharing

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  • Soyoung Kim

    ()
    (Department of Economics, University of Illinois at Urbana)

Abstract

Using a simple theoretical model, I suggest that the nominal revaluation of cross-border assets (the international wealth redistribution through the changes in nominal variables) may work as an international risk-sharing mechanism at the aggregate level. Then, I empirically examine three risk-sharing channels: the nominal revaluation of cross-border assets, the terms-of-trade channel suggested by , and cross-border security ownership (international portfolio diversification). Empirical results suggest that the nominal revaluation hedges country-specific consumption risks at the aggregate level but that the other two channels do not. The results have interesting implications on international risk-sharing and exchange rate regime comparison.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 69 (2002)
Issue (Month): 2 (October)
Pages: 327-344

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Handle: RePEc:sej:ancoec:v:69:2:y:2002:p:327-344

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Web page: http://www.southerneconomic.org/
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Cited by:
  1. Philip R. Lane & Jay C. Shambaugh, 2009. "The Long or Short of it: Determinants of Foreign Currency Exposure in External Balance Sheets," NBER Working Papers 14909, National Bureau of Economic Research, Inc.
  2. Vahagn Galstyan & Philip Lane, 2010. "The Dynamics of Portfolio Holdings in Emerging Europe," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp346, IIIS.
  3. Obstfeld, Maurice, 2012. "Financial flows, financial crises, and global imbalances," Journal of International Money and Finance, Elsevier, Elsevier, vol. 31(3), pages 469-480.

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