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! ]

How Does Financial Globalization Affect Risk Sharing? Patterns and Channels

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
M. Ayhan Kose
Eswar Prasad
Marco Terrones

Additional information is available for the following registered author(s):

Abstract

In theory, one of the main benefits of financial globalization is that it should allow for more efficient international risk sharing. This paper provides a comprehensive empirical evaluation of the patterns of risk sharing among different groups of countries and examines how international financial integration has affected the evolution of these patterns. Using a variety of empirical techniques, we conclude that there is at best a modest degree of international risk sharing, and certainly nowhere near the levels predicted by theory. In addition, only industrial countries have attained better risk sharing outcomes during the recent period of globalization. Developing countries have, by and large, been shut out of this benefit. The most interesting result is that even emerging market economies, which have experienced large increases in cross-border capital flows, have seen little change in their ability to share risk. We find that the composition of flows may help explain why emerging markets have not been able to realize this presumed benefit of financial globalization. In particular, our results suggest that portfolio debt, which has dominated the external liability stocks of most emerging markets until recently, is not conducive to risk sharing.

Download Info
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.

File URL: http://www.imf.org/external/pubs/ft/wp/2007/wp07238.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/238.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 41 pages
Date of creation: 12 Nov 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/238

Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Email:
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC

Order Information:
Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords: Financial integration Globalization Developing countries Financial risk

Other versions of this item:

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.:
  1. Brandt, Michael W. & Cochrane, John H. & Santa-Clara, Pedro, 2006. "International risk sharing is better than you think, or exchange rates are too smooth," Journal of Monetary Economics, Elsevier, vol. 53(4), pages 671-698, May. [Downloadable!] (restricted)
  2. Jean Imbs, 2004. "Trade, Finance, Specialization, and Synchronization," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 723-734, October. [Downloadable!] (restricted)
    Other versions:
  3. M. Ayhan Kose & Eswar Prasad & Kenneth S. Rogoff & Shang-Jin Wei, 2006. "Financial Globalization: A Reappraisal," NBER Working Papers 12484, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Sorensen, Bent E. & Wu, Yi-Tsung & Yosha, Oved & Zhu, Yu, 2007. "Home bias and international risk sharing: Twin puzzles separated at birth," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 587-605, June. [Downloadable!] (restricted)
    Other versions:
  5. M. Ayhan Kose & Christopher Otrok & Charles H. Whiteman, 2005. "Understanding the Evolution of World Business Cycles," IMF Working Papers 05/211, International Monetary Fund. [Downloadable!]
  6. Eduardo Borensztein & Catherine A. Pattillo & Andrew Berg, 2004. "Assessing Early Warning Systems: How Have They Worked in Practice?," IMF Working Papers 04/52, International Monetary Fund. [Downloadable!]
    Other versions:
  7. M. Ayhan Kose & Christopher Otrok & Charles H. Whiteman, 2003. "International Business Cycles: World, Region, and Country-Specific Factors," American Economic Review, American Economic Association, vol. 93(4), pages 1216-1239, September. [Downloadable!] (restricted)
  8. Michael Pakko, 2003. "Substitution Elasticities and Investment Dynamics in Two-Country Business Cycle Models," Topics in Macroeconomics, Berkeley Electronic Press, vol. 3(1), pages 1125-1125. [Downloadable!] (restricted)
    Other versions:
  9. AMBLER, Steve & CARDIA, Emanuela & ZIMMERMANN, Christian, 2000. "International Business Cycles: What Are the Facts?," Cahiers de recherche 2000-05, Universite de Montreal, Departement de sciences economiques. [Downloadable!]
    Other versions:
  10. Sebnem Kalemli-Ozcan & Bent E. Sorensen & Oved Yosha, 2003. "Risk Sharing and Industrial Specialization: Regional and International Evidence," American Economic Review, American Economic Association, vol. 93(3), pages 903-918, June. [Downloadable!] (restricted)
    Other versions:
  11. 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:
  12. repec:rus:hseeco:316849 is not listed on IDEAS
  13. Asdrubali, Pierfederico & Sorensen, Bent E & Yosha, Oved, 1996. "Channels of Interstate Risk Sharing: United States 1963-1990," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1081-1110, November. [Downloadable!] (restricted)
  14. Artis, Michael J & Hoffmann, Mathias, 2007. "Declining Home Bias and the Increase in International Risk Sharing: Lessons from European Integration," CEPR Discussion Papers 6617, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  15. Canova, Fabio & Ravn, Morten O, 1996. "International Consumption Risk Sharing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 573-601, August.
    Other versions:
  16. Rui Albuquerque, 2004. "The Composition of International Capital Flows: Risk Sharing Through Foreign Direct Investment," International Finance 0405004, EconWPA. [Downloadable!]
    Other versions:
  17. Jean Imbs & Paolo Mauro, 2007. "Pooling Risk Among Countries," IMF Working Papers 07/132, International Monetary Fund. [Downloadable!]
    Other versions:
  18. Asli Leblebicioglu, 2006. "Financial Integration, Credit Market Imperfections and Consumption Smoothing," 2006 Meeting Papers 651, Society for Economic Dynamics. [Downloadable!]
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.)

  1. Rodrik, Dani, 2007. "How to Save Globalization from its Cheerleaders," CEPR Discussion Papers 6494, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Kose, M. Ayhan & Otrok, Christopher & Prasad, Eswar, 2008. "Global Business Cycles: Convergence or Decoupling?," IZA Discussion Papers 3442, Institute for the Study of Labor (IZA). [Downloadable!]
  3. Andrew K. Rose & Mark M. Spiegel, 2007. "International financial remoteness and macroeconomic volatility," Working Paper Series 2008-01, Federal Reserve Bank of San Francisco. [Downloadable!]
    Other versions:
  4. Fratzscher, Marcel & Imbs, Jean, 2007. "Risk Sharing, Finance and Institutions in International Portfolios," CEPR Discussion Papers 6496, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
Statistics
Access and download statistics

Did you know? IDEAS also covers the most complete directory of Economics departments and institutes, EDIRC.

This page was last updated on 2008-6-22.

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.