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International risk sharing during the globalization era

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

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.

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Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 45 (2012)
Issue (Month): 2 (May)
Pages: 394-416

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Handle: RePEc:cje:issued:v:45:y:2012:i:2:p:394-416
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  16. Lewis, Karen K, 1996. "What Can Explain the Apparent Lack of International Consumption Risk Sharing?," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 267-97, April.
  17. Eric van Wincoop, 1998. "How big are potential welfare gains from international risksharing?," Staff Reports 37, Federal Reserve Bank of New York.
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