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Banks, Financial Markets and International Consumption Risk Sharing

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  • Markus Leibrecht
  • Johann Scharler

Abstract

In this paper we empirically explore how characteristics of the domestic financial system in uence the international allocation of consumption risk using a sample of OECD countries. Our results show that the extent of risk sharing achieved does not depend on the overall development of the domestic financial system per se. Rather, it depends on how the financial system is organized. Speciffcally, we find that coun- tries characterized by developed financial markets are less exposed to idiosyncratic risk, whereas the development of the banking sector contributes little to the inter- national diversification of consumption risk.
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Suggested Citation

  • Markus Leibrecht & Johann Scharler, 2012. "Banks, Financial Markets and International Consumption Risk Sharing," German Economic Review, Verein für Socialpolitik, vol. 13(3), pages 331-351, August.
    • Handle: RePEc:bla:germec:v:13:y:2012:i:3:p:331-351
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    Cited by:

    1. Asdrubali, Pierfederico & Kim, Soyoung & Pericoli, Filippo Maria & Poncela, Pilar, 2023. "Risk sharing channels in OECD countries: A heterogeneous panel VAR approach," Journal of International Money and Finance, Elsevier, vol. 131(C).
    2. John Bosco Nnyanzi, 2015. "Financial Openness, Capital Flows and Risk Sharing in Africa," Global Economy Journal (GEJ), World Scientific Publishing Co. Pte. Ltd., vol. 15(1), pages 51-82, March.
    3. Nitschka, Thomas, 2011. "Banking sectors' international interconnectedness: Implications for consumption risk sharing in Europe," VfS Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48684, Verein für Socialpolitik / German Economic Association.
    4. Cavoli, Tony & Gopalan, Sasidaran, 2023. "Does financial inclusion promote consumption smoothing? Evidence from emerging and developing economies," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 1529-1546.
    5. Asdrubali, Pierfederico & Kim, Soyoung & Pericoli, Filippo & Poncela, Pilar, 2018. "New Risk Sharing Channels in OECD Countries: a Heterogeneous Panel VAR," JRC Working Papers in Economics and Finance 2018-13, Joint Research Centre, European Commission.
    6. Bos, J.W.B. & Economidou, C. & Zhang, L., 2011. "Specialization in the presence of trade and financial integration: explorations of the integration-specialization nexus," Research Memorandum 026, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).

    More about this item

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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