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International Portfolio Diversification and Endogenous Labour Supply Choice

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Author Info

  • Jermann, U.J.

Abstract

This paper presents a multi-country general equilibrium model driven by productivity shocks, where labor supply and consumption are chosen endogenously. Weuse this framework to study the effect of labor supply for optimal international diversification. We find that the model's ability to help explain home-bias depends crucially on the level of substituability between consumption and non-working time.

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Bibliographic Info

Paper provided by Wharton School - Weiss Center for International Financial Research in its series Weiss Center Working Papers with number 98-06.

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Length: 22 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:fth:pennif:98-06

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Keywords: FINANCIAL ASSETS ; INTERNATIONAL FINANCE;

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References

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  1. Kenneth R. French & James M. Poterba, 1991. "Investor Diversification and International Equity Markets," NBER Working Papers 3609, National Bureau of Economic Research, Inc.
  2. Zvi Bodie & Robert C. Merton & William F. Samuelson, 1992. "Labor Supply Flexibility and Portfolio Choice in a Life-Cycle Model," NBER Working Papers 3954, National Bureau of Economic Research, Inc.
  3. Greenwood, J. & Hercowitz, Z., 1991. "The Allocation of Capital and Time Over the Business Cycle," RCER Working Papers 268, University of Rochester - Center for Economic Research (RCER).
  4. Campbell, John Y, 1996. "Understanding Risk and Return," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 298-345, April.
  5. Taylor, John B & Uhlig, Harald, 1990. "Solving Nonlinear Stochastic Growth Models: A Comparison of Alternative Solution Methods," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(1), pages 1-17, January.
  6. Stulz, Rene M., 1983. "The demand for foreign bonds," Journal of International Economics, Elsevier, vol. 15(3-4), pages 225-238, November.
  7. Charles Ka Yui Leung, 1995. "Does non-traded input necessarily deepen the international non-diversification puzzle I?: The one-good case," Economics Letters, Elsevier, vol. 49(3), pages 281-285, September.
  8. Ellen McGrattan & Richard Rogerson & Randall Wright, 1995. "An equilibrium model of the business cycle with household production and fiscal policy," Staff Report 191, Federal Reserve Bank of Minneapolis.
  9. Paolo Pesenti & Eric van Wincoop, 1996. "Do Nontraded Goods Explain the Home Bias Puzzle?," NBER Working Papers 5784, National Bureau of Economic Research, Inc.
  10. Tesar, Linda L. & Werner, Ingrid M., 1995. "Home bias and high turnover," Journal of International Money and Finance, Elsevier, vol. 14(4), pages 467-492, August.
  11. repec:fth:calaec:04-98 is not listed on IDEAS
  12. Baxter, Marianne & Jermann, Urban J, 1997. "The International Diversification Puzzle Is Worse Than You Think," American Economic Review, American Economic Association, vol. 87(1), pages 170-80, March.
  13. Bottazzi, Laura & Pesenti, Paolo & van Wincoop, Eric, 1996. "Wages, profits and the international portfolio puzzle," European Economic Review, Elsevier, vol. 40(2), pages 219-254, February.
  14. Baxter, Marianne & Jermann, Urban J. & King, Robert G., 1998. "Nontraded goods, nontraded factors, and international non-diversification," Journal of International Economics, Elsevier, vol. 44(2), pages 211-229, April.
  15. Tesar, Linda L., 1993. "International risk-sharing and non-traded goods," Journal of International Economics, Elsevier, vol. 35(1-2), pages 69-89, August.
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Citations

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Cited by:
  1. Karen K. Lewis, 2011. "Global Asset Pricing," NBER Working Papers 17261, National Bureau of Economic Research, Inc.
  2. Karen K. Lewis, 2011. "Global asset pricing," Globalization and Monetary Policy Institute Working Paper 88, Federal Reserve Bank of Dallas.
  3. Leung, Charles Ka Yui & Teo, Wing Leong, 2010. "Should the optimal portfolio be region-specific? A multi-region model with monetary policy and asset price co-movements," MPRA Paper 28216, University Library of Munich, Germany.
  4. Akito Matsumoto, 2007. "The Role of Nonseparable Utility and Nontradeables in International Business Cycle and Portfolio Choice," IMF Working Papers 07/163, International Monetary Fund.
  5. Akito Matsumoto & Charles Engel, 2009. "The International Diversification Puzzle when Goods Prices Are Sticky," IMF Working Papers 09/12, International Monetary Fund.
  6. Akito Matsumoto & Charles Engel, 2005. "Portfolio Choice in a Monetary Open-Economy DSGE Model," IMF Working Papers 05/165, International Monetary Fund.
  7. Harms, Philipp & Hefeker, Carsten, 2003. "Globalization and unemployment: the role of international diversification," Economics Letters, Elsevier, vol. 78(2), pages 281-286, February.
  8. Kapteyn, A. & Teppa, F., 2002. "Subjective Measures of Risk Aversion and Portfolio Choice," Discussion Paper 2002-11, Tilburg University, Center for Economic Research.
  9. Kapteyn, Arie & Teppa, Federica, 2011. "Subjective measures of risk aversion, fixed costs, and portfolio choice," Journal of Economic Psychology, Elsevier, vol. 32(4), pages 564-580, August.
  10. Álvarez-Parra, Fernando & Brandao-Marques, Luis & Toledo, Manuel, 2013. "Durable goods, financial frictions, and business cycles in emerging economies," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 720-736.

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