This file is part of IDEAS , which uses RePEc data
[ Papers |
Articles |
Software |
Books |
Chapters |
Authors |
Institutions |
JEL Classification |
NEP reports |
Search |
New papers by email |
Author registration |
Rankings |
Volunteers |
FAQ |
Blog |
Help! ]
International Risk-Sharing and the Transmission of Productivity Shocks Author info | Abstract | Publisher info | Download info | Related research | Statistics Giancarlo CORSETTI
Luca DEDOLA
Sylvain LEDUC
Additional information is available for the following
registered author(s):
A central puzzle in international finance is that real exchange rates are volatile and, in stark contradiction to e.cient risk-sharing, negatively correlated with relative consumptions across countries. This paper shows that a model with incomplete markets and a low price elasticity of tradables can account for these properties of real exchange rates. The low price elasticity stems from introducing distribution services, intensive in local inputs, which drive a wedge between producer and consumer prices and lower the impact of terms-of-trade changes on optimal agents. decisions. In our model, two very different patterns of the international transmission of productivity shocks generate the observed degree of risk-sharing: one associated with an improvement, the other with a worsening of the country's terms of trade and real exchange rate. We provide VAR evidence on the e.ect of technology shocks to U.S. manufacturing, identified through long-run restrictions, in support of the first transmission pattern. These findings are at odds with the presumption that terms-of-trade movements foster international risk-pooling.
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file . Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Paper provided by European University Institute in its series Economics Working Papers with number
ECO2003/22.
Download reference. The following formats are available: HTML ,
plain text ,
BibTeX ,
RIS (EndNote),
ReDIF
Length:
Date of creation: 2003Date of revision:
Handle: RePEc:eui:euiwps:eco2003/22Contact details of provider: Postal: Badia Fiesolana, Via dei Roccettini, 9, 50016 San Domenico di Fiesole (FI) Italy Phone: +39-055-4685.982 Fax: +39-055-4685.902 Web page: http://www.eui.eu/ECO/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Marcia Gastaldo).
Keywords: incomplete asset markets distribution margin consumption-real exchange rate anomaly Other versions of this item:
Paper Giancarlo Corsetti & Luca Dedola & Sylvain Leduc, 2005.
"International risk-sharing and the transmission of productivity shocks ,"
International Finance Discussion Papers
826, Board of Governors of the Federal Reserve System (U.S.).
[Downloadable!] Giancarlo Corsetti & Luca Dedola & Sylvain Leduc, 2003.
"International risk-sharing and the transmission of productivity shocks ,"
Working Papers
03-19, Federal Reserve Bank of Philadelphia.
[Downloadable!] Giancarlo Corsetti & Luca Dedola & Sylvain Leduc, 2004.
"International risk-sharing and the transmission of productivity shocks ,"
Working Paper Series
308, European Central Bank.
[Downloadable!] Corsetti, Giancarlo & Dedola, Luca & Leduc, Sylvain, 2004.
"International Risk Sharing and the Transmission of Productivity Shocks ,"
CEPR Discussion Papers
4746, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Find related papers by JEL classification: F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports :
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.: David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1993.
"International Business Cycles: Theory and Evidence ,"
Working Papers
93-21, New York University, Leonard N. Stern School of Business, Department of Economics.
Other versions: Costello, Donna M, 1993.
"A Cross-Country, Cross-Industry Comparison of Productivity Growth ,"
Journal of Political Economy ,
University of Chicago Press, vol. 101(2), pages 207-22, April.
[Downloadable!] (restricted)
Harald Uhlig, 2004.
"Do Technology Shocks Lead to a Fall in Total Hours Worked? ,"
Journal of the European Economic Association ,
MIT Press, vol. 2(2-3), pages 361-371, 04/05.
[Downloadable!] (restricted)
Giancarlo Corsetti & Paolo Pesenti, 2001.
"Welfare And Macroeconomic Interdependence ,"
The Quarterly Journal of Economics ,
MIT Press, vol. 116(2), pages 421-445, May.
[Downloadable!] (restricted)
Other versions: Lucas, Robert Jr., 1982.
"Interest rates and currency prices in a two-country world ,"
Journal of Monetary Economics ,
Elsevier, vol. 10(3), pages 335-359.
[Downloadable!] (restricted)
Olivier Jean Blanchard & Danny Quah, 1990.
"The Dynamic Effects of Aggregate Demand and Supply Disturbances ,"
NBER Working Papers
2737, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
Olivier Jean Blanchard & Danny Quah, 1988.
"The Dynamic Effects of Aggregate Demand and Supply Disturbance ,"
Working papers
497, Massachusetts Institute of Technology (MIT), Department of Economics.
Blanchard, Olivier Jean & Quah, Danny, 1989.
"The Dynamic Effects of Aggregate Demand and Supply Disturbances ,"
American Economic Review ,
American Economic Association, vol. 79(4), pages 655-73, September.
[Downloadable!] (restricted) Feenstra, Robert C, 1994.
"New Product Varieties and the Measurement of International Prices ,"
American Economic Review ,
American Economic Association, vol. 84(1), pages 157-77, March.
[Downloadable!] (restricted)
Backus, David K. & Smith, Gregor W., 1993.
"Consumption and real exchange rates in dynamic economies with non-traded goods ,"
Journal of International Economics ,
Elsevier, vol. 35(3-4), pages 297-316, November.
[Downloadable!] (restricted)
Kollmann, R., 1992.
"Consumption, Real Exchange Rates and the Structure of International Asset Markets ,"
Cahiers de recherche
9232, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
Other versions:
Kollmann, R., 1992.
"Consumption, Real Exchange Rates and the Structure of International Asset Markets ,"
Cahiers de recherche
9232, Universite de Montreal, Departement de sciences economiques.
Kollmann, Robert, 1995.
"Consumption, real exchange rates and the structure of international asset markets ,"
Journal of International Money and Finance ,
Elsevier, vol. 14(2), pages 191-211, April.
[Downloadable!] (restricted) Burstein, Ariel Tomas & Neves, Joao C & Rebelo, Sérgio, 2001.
"Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based Stabilization ,"
CEPR Discussion Papers
2944, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
Other versions:
Ariel T. Burstein & Joao C. Neves & Sergio Rebelo, 2000.
"Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based Stabilizations ,"
RCER Working Papers
473, University of Rochester - Center for Economic Research (RCER).
[Downloadable!] Ariel T. Burstein & Joao C. Neves & Sergio Rebelo, 2000.
"Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based-Stabilizations ,"
NBER Working Papers
7862, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Burstein, Ariel T. & Neves, Joao C. & Rebelo, Sergio, 2003.
"Distribution costs and real exchange rate dynamics during exchange-rate-based stabilizations ,"
Journal of Monetary Economics ,
Elsevier, vol. 50(6), pages 1189-1214, September.
[Downloadable!] (restricted) Mendoza, Enrique G, 1991.
"Real Business Cycles in a Small Open Economy ,"
American Economic Review ,
American Economic Association, vol. 81(4), pages 797-818, September.
[Downloadable!] (restricted)
King, R.G., 1989.
"Value And Capital - In The Equilibrium Business Cycle Program ,"
RCER Working Papers
207, University of Rochester - Center for Economic Research (RCER).
James E. Anderson & Eric van Wincoop, 2004.
"Trade Costs ,"
NBER Working Papers
10480, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions: V.V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2000.
"Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates? ,"
NBER Working Papers
7869, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
V.V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1998.
"Can sticky price models generate volatile and persistent real exchange rates? ,"
Staff Report
223, Federal Reserve Bank of Minneapolis.
[Downloadable!] V.V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2002.
"Can sticky price models generate volatile and persistent real exchange rates? ,"
Staff Report
277, Federal Reserve Bank of Minneapolis.
[Downloadable!] Chari, V V & Kehoe, Patrick J & McGrattan, Ellen R, 2002.
"Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates? ,"
Review of Economic Studies ,
Blackwell Publishing, vol. 69(3), pages 533-63, July.
Stockman, Alan C & Tesar, Linda L, 1995.
"Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements ,"
American Economic Review ,
American Economic Association, vol. 85(1), pages 168-85, March.
[Downloadable!] (restricted)
Other versions:
Alan C. Stockman & Linda L. Tesar, 1995.
"Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements ,"
NBER Working Papers
3566, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Alan C. Stockman & Linda L. Tesar, 1991.
"Tastes and technology in a two-country model of the business cycle: explaining international co-movements ,"
Working Paper
9019, Federal Reserve Bank of Cleveland.
[Downloadable!] Stockman, A.C. & Tesar, L.L., 1990.
"Tastes And Technology In A Two-Country Model Of The Business Cycle: Explaining International Comovements ,"
University of California Santa Barbara - Department of Economics
16-90, California Santa Barbara - Department of Economics.
Clarida, Richard & Galí, Jordi, 1994.
"Sources of Real Exchange Rate Fluctuations: How Important are Nominal Shocks? ,"
CEPR Discussion Papers
951, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
Other versions:
Jordi Galí & Richard Clarida, 1993.
"Sources of Real Exchage Rate Fluctuations: How Important are Nominal Shocks? ,"
Economics Working Papers
66, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 1994.
Richard Clarida & Jordi Gali, 1994.
"Sources of Real Exchange Rate Fluctuations: How Important are Nominal Shocks? ,"
NBER Working Papers
4658, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Clarida, Richard & Gali, Jordi, 1994.
"Sources of real exchange-rate fluctuations: How important are nominal shocks? ,"
Carnegie-Rochester Conference Series on Public Policy ,
Elsevier, vol. 41(1), pages 1-56, December.
[Downloadable!] (restricted) Richard Clarida & Jordi Gali, 1994.
"Sources of real exchange rate fluctuations: how important are nominal shocks? ,"
Proceedings ,
Federal Reserve Bank of Dallas, issue Apr.
King, Robert G & Watson, Mark W, 1998.
"The Solution of Singular Linear Difference Systems under Rational Expectations ,"
International Economic Review ,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 1015-26, November.
Stephanie Schmitt-Grohe & Martin Uribe, 2001.
"Closing Small Open Economy Models ,"
Departmental Working Papers
200115, Rutgers University, Department of Economics.
[Downloadable!]
Other versions:
Stephanie Schmitt-Grohe & Martin Uribe, 2002.
"Closing Small Open Economy Models ,"
NBER Working Papers
9270, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Schmitt-Grohé, Stephanie & Uribe, Martín, 2002.
"Closing Small Open Economy Models ,"
CEPR Discussion Papers
3096, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Schmitt-Grohe, Stephanie & Uribe, Martin, 2003.
"Closing small open economy models ,"
Journal of International Economics ,
Elsevier, vol. 61(1), pages 163-185, October.
[Downloadable!] (restricted) Daron Acemoglu & Jaume Ventura, 2002.
"The World Income Distribution ,"
The Quarterly Journal of Economics ,
MIT Press, vol. 117(2), pages 659-694, May.
[Downloadable!] (restricted)
Other versions: Jordi Gali, 1999.
"Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations? ,"
American Economic Review ,
American Economic Association, vol. 89(1), pages 249-271, March.
[Downloadable!] (restricted)
Other versions:
Jordi Gali, 1996.
"Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations ,"
NBER Working Papers
5721, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Gali, J., 1996.
"Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations? ,"
Working Papers
96-28, C.V. Starr Center for Applied Economics, New York University.
[Downloadable!] Galí, Jordi, 1996.
"Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations? ,"
CEPR Discussion Papers
1499, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Corsetti, Giancarlo & Dedola, Luca, 2003.
"Macroeconomics of International Price Discrimination ,"
CEPR Discussion Papers
3710, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
Other versions:
Giancarlo CORSETTI & Luca DEDOLA, 2003.
"Macroeconomics of International Price Discrimination ,"
Economics Working Papers
ECO2003/20, European University Institute.
[Downloadable!] Giancarlo Corsetti & Luca Dedola, 2002.
"Macroeconomics of international price discrimination ,"
Temi di discussione (Economic working papers)
461, Bank of Italy, Economic Research Department.
[Downloadable!] Giancarlo Corsetti & Luca Dedola, 2002.
"Macroeconomics of international price discrimination ,"
International Finance Discussion Papers
744, Board of Governors of the Federal Reserve System (U.S.).
[Downloadable!] Baxter, Marianne & Crucini, Mario J, 1995.
"Business Cycles and the Asset Structure of Foreign Trade ,"
International Economic Review ,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 821-54, November.
[Downloadable!] (restricted)
Other versions:
Baxter, M. & Crucini, M., 1991.
"Business Cycles and the Asset Structure of Foreign Trade ,"
RCER Working Papers
316, University of Rochester - Center for Economic Research (RCER).
Marianne Baxter & Mario J. Crucini, 1994.
"Business Cycles and the Asset Structure of Foreign Trade ,"
NBER Working Papers
4975, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Marianne Baxter & Mario J. Crucini, 1992.
"Business cycles and the asset structure of foreign trade ,"
Discussion Paper / Institute for Empirical Macroeconomics
59, Federal Reserve Bank of Minneapolis.
[Downloadable!] Giancarlo Corsetti & Paolo Pesenti, 2001.
"International dimensions of optimal monetary policy ,"
Staff Reports
124, Federal Reserve Bank of New York.
[Downloadable!]
Other versions:
Corsetti, Giancarlo & Pesenti, Paolo, 2002.
"International Dimensions of Optimal Monetary Policy ,"
CEPR Discussion Papers
3349, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Giancarlo Corsetti & Paolo Pesenti, 2001.
"International Dimensions of Optimal Monetary Policy ,"
NBER Working Papers
8230, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Corsetti, Giancarlo & Pesenti, Paolo, 2005.
"International dimensions of optimal monetary policy ,"
Journal of Monetary Economics ,
Elsevier, vol. 52(2), pages 281-305, March.
[Downloadable!] (restricted) Cole, Harold L. & Obstfeld, Maurice, 1991.
"Commodity trade and international risk sharing : How much do financial markets matter? ,"
Journal of Monetary Economics ,
Elsevier, vol. 28(1), pages 3-24, August.
[Downloadable!] (restricted)
Other versions: Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003.
"What Happens After a Technology Shock? ,"
NBER Working Papers
9819, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions: Ariel T. Burstein & João C. Neves & Sergio Rebelo, 2004.
"Investment Prices and Exchange Rates: Some Basic Facts ,"
Journal of the European Economic Association ,
MIT Press, vol. 2(2-3), pages 302-309, 04/05.
[Downloadable!] (restricted)
Other versions:
Ariel Burstein & Joao C. Neves & Sergio Rebelo, 2004.
"Investment Prices and Exchange Rates: Some Basic Facts ,"
NBER Working Papers
10238, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Burstein, Ariel Tomas & Neves, Joao C & Rebelo, Sérgio, 2004.
"Investment Prices and Exchange Rates: Some Basic Facts ,"
CEPR Discussion Papers
4290, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Giancarlo Corsetti & Luca Dedola, 2002.
"From the ERM to the Euro: new evidence on economic and policy convergence among EU countries ,"
Working Paper Series
176, European Central Bank.
[Downloadable!]
Other versions: Baxter, Marianne & Crucini, Mario J, 1993.
"Explaining Saving-Investment Correlations ,"
American Economic Review ,
American Economic Association, vol. 83(3), pages 416-36, June.
[Downloadable!] (restricted)
Other versions: Heathcote, Jonathan & Perri, Fabrizio, 2002.
"Financial autarky and international business cycles ,"
Journal of Monetary Economics ,
Elsevier, vol. 49(3), pages 601-627, April.
[Downloadable!] (restricted)
Other versions: Maurice Obstfeld, 1986.
"Floating Exchange Rates: Experience and Prospects ,"
NBER Reprints
0792, National Bureau of Economic Research, Inc.
Lewis, Karen K, 1996.
"What Can Explain the Apparent Lack of International Consumption Risk Sharing? ,"
Journal of Political Economy ,
University of Chicago Press, vol. 104(2), pages 267-97, April.
[Downloadable!] (restricted)
Alan C. Stockman, 1998.
"New evidence connecting exchange rates to business cycles ,"
Economic Quarterly ,
Federal Reserve Bank of Richmond, issue Spr, pages 73-89.
[Downloadable!]
Ravn, Morten O., 2001.
"Consumption Dynamics and Real Exchange Rate ,"
CEPR Discussion Papers
2940, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
Obstfeld, Maurice, 1990.
"Intertemporal dependence, impatience, and dynamics ,"
Journal of Monetary Economics ,
Elsevier, vol. 26(1), pages 45-75, August.
[Downloadable!] (restricted)
Other versions: repec:fth:harver:1504 is not listed on IDEAS
Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992.
"International Real Business Cycles ,"
Journal of Political Economy ,
University of Chicago Press, vol. 100(4), pages 745-75, August.
[Downloadable!] (restricted)
Other versions: Stockman, Alan C. & Dellas, Harris, 1989.
"International portfolio nondiversification and exchange rate variability ,"
Journal of International Economics ,
Elsevier, vol. 26(3-4), pages 271-289, May.
[Downloadable!] (restricted)
Full
references Cited by : (explanations , 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.) This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page .
Access and
download statistics Did you know? Data contributors to RePEc receive monthly emails with details about downloads and abstract views of their works.
This page was last updated on 2008-9-28.
This information is provided to you by IDEAS at the Department of Economics , College of Liberal Arts and Sciences , University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics .