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Financial Globalization, Capital Account Liberalization and International Consumption Risk-Sharing

This paper analyzes whether international risk-sharing has improved along the same lines as the process of financial globalization. International financial markets allow investors to efficiently diversify their risks. Agents can protect themselves against fluctuations in their incomes through trading in assets with appropriate payoff structures. However, the usual finding in the literature is that international risk-sharing is quite limited. We argue that despite the liberalization of capital accounts and the removal of various legal barriers to capital mobility, international risk-sharing still appears to be rather limited.

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File URL: http://www.oenb.at/dms/oenb/Publikationen/Volkswirtschaft/Focus-on-European-Economic-Integration/2005/Focus-on-European-Economic-Integration-Q1-05/chapters/feei_05_1_financial_glob_tcm16-29797.pdf
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Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Focus on European Economic Integration.

Volume (Year): (2005)
Issue (Month): 1 ()
Pages: 98-106

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Handle: RePEc:onb:oenbfi:y:2005:i:1:b:3
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  1. Andrew Atkeson & Tamim Bayoumi, 1993. "Do private capital markets insure regional risk? Evidence from the United States and Europe," Open Economies Review, Springer, vol. 4(3), pages 303-324, September.
  2. 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.
  3. BAI, Jushan & PERRON, Pierre, 1998. "Computation and Analysis of Multiple Structural-Change Models," Cahiers de recherche 9807, Universite de Montreal, Departement de sciences economiques.
  4. Philip Lane & Gian Maria Milesi-Ferretti, 2001. "THE EXTERNAL WEALTH OF NATIONS: Measures of Foreign Assets and Liabilities For Industrial and Developing Countries," CEG Working Papers 20012, Trinity College Dublin, Department of Economics.
  5. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1991. "International real business cycles," Staff Report 146, Federal Reserve Bank of Minneapolis.
  6. French, Kenneth R & Poterba, James M, 1991. "Investor Diversification and International Equity Markets," American Economic Review, American Economic Association, vol. 81(2), pages 222-26, May.
  7. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
  8. Melitz, Jacques & Zumer, Frédéric, 1999. "Interregional and International Risk Sharing and Lessons for EMU," CEPR Discussion Papers 2154, C.E.P.R. Discussion Papers.
  9. Sorensen, Bent E. & Yosha, Oved, 1998. "International risk sharing and European monetary unification," Journal of International Economics, Elsevier, vol. 45(2), pages 211-238, August.
  10. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-29, June.
  11. Manganelli, Simone & Hartmann, Philipp & Maddaloni, Angela, 2003. "The euro area financial system: structure, integration and policy initiatives," Working Paper Series 0230, European Central Bank.
  12. repec:ebl:ecbull:v:6:y:2004:i:23:p:1-13 is not listed on IDEAS
  13. 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.
  14. Karen K. Lewis, 1999. "Trying to Explain Home Bias in Equities and Consumption," Journal of Economic Literature, American Economic Association, vol. 37(2), pages 571-608, June.
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