International risk-sharing in the short run and in the long run
International risk-sharing has far-reaching implications both for economic policy and for basic research in economics. When countries do not share consumption risk, individuals experience consumption fluctuations that are undesirable and possibly unnecessary. We investigate bilateral risk-sharing at short vs. long horizons. We find substantial cross-country consumption correlations at trend and business-cycle frequencies. Correlations are particularly high within Europe. Prior research focused on first-difference correlations, which are typically quite low. We argue that this reflects measurement error. At all horizons, we find that consumption correlations are not significantly different from output correlations, implying a lack of deliberate consumption risk-sharing.
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Volume (Year): 45 (2012)
Issue (Month): 2 (May)
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Canova, Fabio & Ravn, Morten O, 1996.
"International Consumption Risk Sharing,"
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Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 573-601, August.
- 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.
- Canova, Fabio & Ravn, Morten O, 1994. "International Consumption Risk Sharing," CEPR Discussion Papers 1074, C.E.P.R. Discussion Papers.
- Robert P. Flood & Nancy P. Marion & Akito Matsumoto, 2012.
"International risk sharing during the globalization era,"
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Canadian Economics Association, vol. 45(2), pages 394-416, May.
- 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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