Advanced Search
MyIDEAS: Login to save this paper or follow this series

Globalization and Risk Sharing

Contents:

Author Info

  • Fernando A Broner
  • Jaume Ventura

Abstract

This paper presents a theoretical study of the effects of globalization on risk sharing and welfare. We model globalization as a gradual and exogenous increase in the fraction of goods that are tradable. In the absence of frictions, globalization opens new goods markets and raises welfare. We assume, however, that countries cannot commit to pay their debts. Unlike the previous literature, and motivated by changes in the institutional setup of emerging-market borrowing, we also assume that countries cannot discriminate between domestic and foreign creditors when paying their debts. Although globalization still opens new goods markets, we find that it can also open or close some asset markets. The net eect on risk sharing and welfare of this process of creation and destruction of markets might be either positive or negative depending on a variety of factors that the theory highlights.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://research.barcelonagse.eu/tmp/working_papers/307.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 307.

as in new window
Length:
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:bge:wpaper:307

Contact details of provider:
Postal: Ramon Trias Fargas, 25-27, 08005 Barcelona
Phone: +34 93 542-1222
Fax: +34 93 542-1223
Email:
Web page: http://www.barcelonagse.eu
More information through EDIRC

Related research

Keywords: globalization; risk sharing; sovereign risk; domestic markets; international markets;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Arteta, Carlos & Eichengreen, Barry & Wyplosz, Charles, 2001. "When Does Capital Account Liberalization Help More Than it Hurts?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2910, C.E.P.R. Discussion Papers.
  2. Jeremy I. Bulow & Kenneth Rogoff, 1988. "Sovereign Debt: Is To Forgive To Forget?," NBER Working Papers 2623, National Bureau of Economic Research, Inc.
  3. Patrick J. Kehoe & Fabrizio Perri, 2000. "International Business Cycles with Endogenous Incomplete Markets," NBER Working Papers 7870, National Bureau of Economic Research, Inc.
  4. Jaume Ventura, 2005. "A global view of economic growth," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 849, Department of Economics and Business, Universitat Pompeu Fabra.
  5. Newbery, David M G & Stiglitz, Joseph E, 1984. "Pareto Inferior Trade," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 51(1), pages 1-12, January.
  6. Dixit, Avinash K, 1989. "Trade and Insurance with Adverse Selection," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 56(2), pages 235-47, April.
  7. Kenneth M. Kletzer & Brian D. Wright, 2000. "Sovereign Debt as Intertemporal Barter," International Finance, EconWPA 0003004, EconWPA.
  8. Harold L. Cole & Maurice Obstfeld, 1989. "Commodity Trade and International Risk Sharing: How Much Do Financial Markets Matter?," NBER Working Papers 3027, National Bureau of Economic Research, Inc.
  9. Bulow, Jeremy & Rogoff, Kenneth, 1989. "A Constant Recontracting Model of Sovereign Debt," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(1), pages 155-78, February.
  10. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 544, Board of Governors of the Federal Reserve System (U.S.).
  11. M. Ayhan Kose & Marco Terrones & Eswar Prasad, 2003. "Volatility and Comovement in a Globalized World Economy," IMF Working Papers, International Monetary Fund 03/246, International Monetary Fund.
  12. Andrew K. Rose, 2001. "One reason countries pay their debts: renegotiation and international trade," Staff Reports, Federal Reserve Bank of New York 142, Federal Reserve Bank of New York.
  13. Jonathan Eaton & Raquel Fernandez, 1995. "Sovereign Debt," Boston University - Institute for Economic Development, Boston University, Institute for Economic Development 59, Boston University, Institute for Economic Development.
  14. Fernandez, R. & Rosenthal, R.W., 1988. "Sovereign-Debt Renegotiations: A Strtegic Analysis," Papers, Boston University - Center for Latin American Development Studies 85, Boston University - Center for Latin American Development Studies.
  15. Harold L. Cole & Patrick J. Kehoe, 1997. "Reviving reputation models of international debt," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Win, pages 21-30.
  16. Marco Terrones & Eswar Prasad & M. Ayhan Kose, 2003. "Financial Integration and Macroeconomic Volatility," IMF Working Papers, International Monetary Fund 03/50, International Monetary Fund.
  17. Roberto Chang & Andrés Velasco, 1999. "Liquidity Crises in Emerging Markets: Theory and Policy," Documentos de Trabajo, Centro de Economía Aplicada, Universidad de Chile 59, Centro de Economía Aplicada, Universidad de Chile.
  18. Kehoe, Patrick J. & Perri, Fabrizio, 2004. "Competitive equilibria with limited enforcement," Journal of Economic Theory, Elsevier, Elsevier, vol. 119(1), pages 184-206, November.
  19. Jose Vicente Martinez and Guido Sandleris, 2008. "Is it Punishment? Sovereign Defaults and the Decline in Trade," Business School Working Papers, Universidad Torcuato Di Tella 2008-01, Universidad Torcuato Di Tella.
  20. Grossman, Herschel I & Van Huyck, John B, 1988. "Sovereign Debt as a Contingent Claim: Excusable Default, Repudiation, and Reputation," American Economic Review, American Economic Association, American Economic Association, vol. 78(5), pages 1088-97, December.
  21. Mark L. J. Wright, 2004. "Private capital flows, capital controls, and default risk," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Jun.
  22. Dixit, Avinash, 1989. "Trade and Insurance with Imperfectly Observed Outcomes," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 104(1), pages 195-203, February.
  23. Eaton, Jonathan & Gersovitz, Mark, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 48(2), pages 289-309, April.
  24. M. Ayhan Kose & Kenneth Rogoff & Eswar Prasad & Shang-Jin Wei, 2003. "Effects of Financial Globalization on Developing Countries," IMF Occasional Papers, International Monetary Fund 220, International Monetary Fund.
  25. Harold L. Cole & James Dow & William B. English, 1994. "Default, settlement, and signalling: lending resumption in a reputational model of sovereign debt," Staff Report, Federal Reserve Bank of Minneapolis 180, Federal Reserve Bank of Minneapolis.
  26. Andrei A. Levchenko, 2005. "Financial Liberalization and Consumption Volatility in Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 237-259, September.
  27. Andrew Atkeson, 2010. "International lending with moral hazard and risk of repudiation," Levine's Working Paper Archive 200, David K. Levine.
  28. Jean Tirole, 2003. "Inefficient Foreign Borrowing: A Dual- and Common-Agency Perspective," American Economic Review, American Economic Association, American Economic Association, vol. 93(5), pages 1678-1702, December.
  29. Caballero, Ricardo J. & Krishnamurthy, Arvind, 2001. "International and domestic collateral constraints in a model of emerging market crises," Journal of Monetary Economics, Elsevier, Elsevier, vol. 48(3), pages 513-548, December.
  30. M. Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2006. "Financial Globalization," IMF Working Papers, International Monetary Fund 06/189, International Monetary Fund.
  31. Bulow, Jeremy & Rogoff, Kenneth S., 1989. "A Constant Recontracting Model of Sovereign Debt," Scholarly Articles 12491028, Harvard University Department of Economics.
  32. Dixit, Avinash, 1987. "Trade and insurance with moral hazard," Journal of International Economics, Elsevier, Elsevier, vol. 23(3-4), pages 201-220, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bge:wpaper:307. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruno Guallar).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.