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International Risk Sharing in the Short Run and in the Long Run

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  • Marianne Baxter

Abstract

International risk-sharing has far-reaching implications both for economic policy and for basic research in economics. When countries do not share risk, individuals in those countries experience fluctuations in their consumption levels that are undesirable and possibly unnecessary. This paper extends and refines the study of international risk-sharing in two dimensions. First, this paper investigates risk-sharing at short vs. long horizons. Countries might, for example, pool risks associated with high-frequency shocks (e.g., seasonal fluctuations in crop yields) but might not share risks associated with low frequency shocks (e.g., different long-run national growth rates). Second, this paper studies bilateral risk-sharing, which is different from the approach taken in most previous studies. We find that there is evidence of substantial international risk-sharing at medium and low frequencies. There is evidence of high and increasing risk-sharing within Europe that is not apparent for other regions of the world.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16789.

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Date of creation: Feb 2011
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Handle: RePEc:nbr:nberwo:16789

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  1. Fabio Canova & Morten O. Ravn, 1993. "International consumption risk sharing," Economics Working Papers 135, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 1995.
  2. Akito Matsumoto & Robert P. Flood & Nancy P. Marion, 2009. "International Risk Sharing During the Globalization Era," IMF Working Papers 09/209, International Monetary Fund.
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Cited by:
  1. N. Holinski & C.J.M. Kool & J. Muysken, 2011. "The Impact of International Portfolio Composition on Consumption Risk Sharing," Working Papers 11-20, Utrecht School of Economics.
  2. Pau Rabanal & Juan F. Rubio-Ramirez, 2012. "Can International Macroeconomic Models Explain Low-Frequency Movements of Real Exchange Rates?," IMF Working Papers 12/13, International Monetary Fund.
  3. Martin Schmitz, 2013. "Financial Markets And International Risk Sharing In Emerging Market Economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 18(3), pages 266-277, 07.
  4. Kim, H. Youn, 2014. "International financial integration and risk sharing among countries: A production-based approach," Journal of the Japanese and International Economies, Elsevier, vol. 31(C), pages 16-35.

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