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International risk sharing during the globalization era

Author

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  • Robert P. Flood
  • Nancy P. Marion
  • Akito Matsumoto

Abstract

Though financial globalization should improve international risk sharing, empirical support is lacking. We develop a simple welfare-based measure that captures how far countries are from the ideal of perfect risk sharing. Applying it to data, we find some evidence that international risk sharing has improved during globalization. Improved risk sharing comes mostly from the convergence in rates of consumption growth among countries rather than from synchronization of consumption at the business cycle frequency.

Suggested Citation

  • Robert P. Flood & Nancy P. Marion & Akito Matsumoto, 2012. "International risk sharing during the globalization era," Canadian Journal of Economics, Canadian Economics Association, vol. 45(2), pages 394-416, May.
    • Handle: RePEc:cje:issued:v:45:y:2012:i:2:p:394-416
    DOI: 10.1111/j.1540-5982.2012.01700.x
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    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • D6 - Microeconomics - - Welfare Economics

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