International risk sharing in the short run and in the long run
AbstractUsing a panel of 23 industrialised countries, the paper investigates how short-run and long-run income risks are shared and how the source of uncertainty matters for the way this risk gets insured. Surprisingly, short-term and long-term output risks are found to be equally well insured. Transitory shocks get smoothed almost completely whereas permanent shocks remain 80 percent uninsured. We find a somewhat more important role for international capital markets than earlier studies. Whereas our results tie in with some recent theoretical insights and are consistent with empirical findings on home bias in international portfolios, they raise the question why permanent shocks are so hard to insure internationally. Keywords; international consumption risk sharing, European integration, panel data, panel vector autoregressions
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Bibliographic InfoPaper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 0102.
Date of creation: 01 Jan 2001
Date of revision:
Other versions of this item:
- Sascha O. BECKER & Mathias HOFFMANN, 2001. "International Risk-Sharing in the Short Run and in the Long Run," Economics Working Papers ECO2001/03, European University Institute.
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