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Risk-Taking, Global Diversification, and Growth Author info | Abstract | Publisher info | Download info | Related research | Statistics Obstfeld, Maurice
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This paper develops a dynamic continuous-time model in which international risk sharing can yield substantial welfare gains through its positive effect on expected consumption growth. The mechanism linking global diversification to growth is an attendant world portfolio shift from safe, but low-yield, capital into riskier, high-yield capital. The presence of these two types of capital is designed to capture the idea that growth depends on the availability of an ever-increasing array of specialized, and hence inherently risky, production inputs. A partial calibration exercise based on Penn World Table consumption data implies steady-state welfare gains from global financial integration, which for some regions amount to several times initial wealth.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
688.
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Date of creation: Aug 1992Date of revision:
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Keywords: Economic Growth ; International Financial Markets ; International Portfolio Diversification ; Other versions of this item:
Article Paper Maurice Obstfeld, 1992.
"Risk-taking, global diversification, and growth ,"
Discussion Paper / Institute for Empirical Macroeconomics
61, Federal Reserve Bank of Minneapolis.
[Downloadable!] Maurice Obstfeld., 1993.
"Risk-Taking, Global Diversification, and Growth ,"
Center for International and Development Economics Research (CIDER) Working Papers
C93-016, University of California at Berkeley.
Maurice Obstfeld, 1995.
"Risk-Taking, Global Diversification, and Growth ,"
NBER Working Papers
4093, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Find related papers by JEL classification: G15 - Financial Economics - - General Financial Markets - - - International Financial Markets O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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