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Incomplete Intertemporal Consumption Smoothing and Incomplete Risk Sharing

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  • PIERFEDERICO ASDRUBALI
  • SOYOUNG KIM

Abstract

This paper develops a method to estimate jointly the degree of intertemporal consumption smoothing and the degree of "inter-regional" risk sharing. The empirical results for the U.S. states and OECD and EU countries suggest that: (i) regardless of the assumption on the degree of intertemporal consumption smoothing, the degree of risk sharing within a country is larger than across countries; (ii) the degree of intertemporal consumption smoothing within a country is also larger than across countries; and (iii) the difference between the degree of intertemporal consumption smoothing within U.S. states and across OECD and EU countries is as large as the difference between the degree of risk sharing, contrary to the findings of some past studies. Copyright (c) 2008 The Ohio State University.

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  • Pierfederico Asdrubali & Soyoung Kim, 2008. "Incomplete Intertemporal Consumption Smoothing and Incomplete Risk Sharing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(7), pages 1521-1531, October.
  • Handle: RePEc:mcb:jmoncb:v:40:y:2008:i:7:p:1521-1531
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    7. Peter Fuleky & Luigi Ventura & Qianxue Zhao, 2018. "Common correlated effects and international risk sharing," International Finance, Wiley Blackwell, vol. 21(1), pages 55-70, March.
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    9. Alessandro Federici & Pierluigi Montalbano, 2012. "Macroeconomic volatility, consumption behaviour and welfare: A cross-country analysis," Working Paper Series 3612, Department of Economics, University of Sussex Business School.
    10. Jeongseok Song & Doojin Ryu, 2018. "Aging effects on consumption risk-sharing channels in European countries," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 36(2), pages 585-617.
    11. Tomas Havranek & Anna Sokolova, 2016. "Do Consumers Really Follow a Rule of Thumb? Three Thousand Estimates from 130 Studies Say "Probably Not"," Working Papers 2016/08, Czech National Bank.
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    13. Hevia, Constantino & Serven, Luis, 2013. "Partial consumption insurance and financial openness across the world," Policy Research Working Paper Series 6479, The World Bank.
    14. Andrea Colciago & Tiziano Ropele & V. Anton Muscatelli & Patrizio Tirelli, 2008. "The Role of Fiscal Policy in a Monetary Union: are National Automatic Stabilizers Effective?," Review of International Economics, Wiley Blackwell, vol. 16(3), pages 591-610, August.
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    16. Ho, Chun-Yu & Ho, Wai-Yip Alex & Li, Dan, 2010. "Consumption Fluctuations and Welfare: Evidence from China," World Development, Elsevier, vol. 38(9), pages 1315-1327, September.
    17. Chun‐Yu Ho & Wai‐Yip Alex Ho, 2015. "Dynamics and Heterogeneity of Inter‐ and Intranational Risk Sharing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(1), pages 123-142, February.
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    20. Mr. Tamim Bayoumi & Mr. Alun H. Thomas, 2009. "Today versus Tomorrow - The Sensitivity of the Non-Oil Current Account Balance to Permanent and Current Income," IMF Working Papers 2009/248, International Monetary Fund.

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • 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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