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Debt Crises and Risk-Sharing: The Role of Markets versus Sovereigns

  • Sebnem Kalemli-Ozcan
  • Emiliano Luttini
  • Bent Sørensen

Using a variance decomposition of shocks to GDP, we quantify the role of international factor income, international transfers, and saving in achieving risk sharing during the recent European crisis. We focus on the sub-periods 1990--2007, 2008--2009, and 2010 and consider separately the European countries hit by the sovereign debt crisis in 2010. We decompose risk sharing from saving into contributions from government and private saving and show that fiscal austerity programs played an important role in hindering risk sharing during the sovereign debt crisis.

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File URL: http://hdl.handle.net/10.1111/sjoe.2014.116.issue-1
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Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 116 (2014)
Issue (Month): 1 (01)
Pages: 253-276

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Handle: RePEc:bla:scandj:v:116:y:2014:i:1:p:253-276
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  10. 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.
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