Domestic and International Finance: How Do They Affect Consumption Smoothing?
AbstractThis Paper uses empirical proxies for the domestic development and international integration of debt and equity markets to assess the role of financial development in international consumption smoothing. First, we find that both domestic and international finance contribute to international consumption smoothing. Second, domestic debt market development is relatively important in explaining consumption smoothing relative to GNP among developed countries, while international debt market integration appears to be the limiting factor in developing countries. Third, both debt and equity market development contribute to the smoothing of consumption relative to GDP, with a somewhat larger role for the former than the latter. Finally, debt and equity market development reveal themselves to be substitutes in that more of one reduces the contribution of the other to consumption smoothing.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4677.
Date of creation: Oct 2004
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Find related papers by JEL classification:
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- F20 - International Economics - - International Factor Movements and International Business - - - General
- F30 - International Economics - - International Finance - - - General
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- NEP-ALL-2005-02-13 (All new papers)
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