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Channels of risk-sharing among Canadian provinces: 1961--2006

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  • Balli, Faruk
  • Basher, Syed Abul
  • Jean Louis, Rosmy

Abstract

This paper incorporates recent developments in the literature to quantify the amount of interprovincial risk-sharing in Canada. We find that 29% of shocks to gross provincial product are smoothed by capital markets, 27% are smoothed by the federal tax-transfer systems, and about 24% are smoothed by credit markets. The remaining 20% are not smoothed. Our results bring to light the critical role that Alberta plays in trading-off credit market smoothing for more capital market risk-sharing with the rest of Canada. Our pairwise risk-sharing analysis has brought up some interesting questions and arguments that are often neglected in discussions of regional risk-sharing. For example, one aspect of the pairwise analysis sheds light on the assessment of the economic effects of Quebec separation.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30876.

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Date of creation: 12 May 2011
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Handle: RePEc:pra:mprapa:30876

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Keywords: Risk-sharing; pairwise risk-sharing; federal taxes and transfer; panel data; cross-sectional dependence.;

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Citations

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Cited by:
  1. Jean Louis, Rosmy & Brown, Ryan & Balli, Faruk, 2011. "On the feasibility of monetary union: Does it make sense to look for shocks symmetry across countries when none of the countries constitutes an optimum currency area?," Economic Modelling, Elsevier, Elsevier, vol. 28(6), pages 2701-2718.
  2. Masayoshi Hayashi, 2013. "On the Decomposition of Regional Stabilization and Redistribution," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-910, CIRJE, Faculty of Economics, University of Tokyo.
  3. Guidara, Alaa & Lai, Van Son & Soumaré, Issouf & Tchana Tchana, Fulbert, 2013. "Banks’ Capital Buffer, Risk and Performance in the Canadian Banking System: Impact of Business Cycles and Regulatory Changes," MPRA Paper 44105, University Library of Munich, Germany.
  4. Masayoshi Hayashi, 2012. "Channels of Stabilization in a System of Local Public Health Insurance: The Case of the National Health Insurance in Japan," CARF F-Series, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo CARF-F-280, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.

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