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A Review of International Risk Sharing for Policy Analysis

Author

Listed:
  • Poncela, Pilar

    () (Universidad Autónoma de Madrid)

  • Nardo, Michela

    () (European Commission-Joint Research Centre)

  • Pericoli, Filippo M.

    () (European Commission-Joint Research Centre)

Abstract

This paper offers a comprehensive view of international risk sharing and of related policy issues from the perspective of the European Union. The traditional analyses contemplate three risk-sharing channels: the capital markets channel (through cross border portfolio investments), international transfers and the credit markets channel (via savings). Comparative analyses reveal that, on average, about 80% of the shock remains unsmoothed in Europe while only about 18% of the shock is transmitted to consumers within the US. From aggregated figures, there is space for improving, particularly, the cross-border investments channel in Europe. In this sense, the completion of the Banking and Capital Markets Union are expected to boost risk sharing across European member states. We also review new additional issues usually not contemplated by the traditional literature as depreciation, migration and the role of sovereigns and two new additional channels recently considered in the literature: government consumption and the real exchange rate. Finally, we also examine recent analysis related to the geographic distribution of risk sharing.

Suggested Citation

  • Poncela, Pilar & Nardo, Michela & Pericoli, Filippo M., 2019. "A Review of International Risk Sharing for Policy Analysis," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 23(3), pages 227-260, September.
  • Handle: RePEc:ris:eaerev:0362
    DOI: 10.11644/KIEP.EAER.2019.23.3.362
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    File URL: http://dx.doi.org/10.11644/KIEP.EAER.2019.23.3.362
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    Cited by:

    1. Nardo, Michela & Ossola, Elisa & Papanagiotou, Evangalia, 2020. "Financial integration in the EU28 equity markets: measures and drivers," Working Papers 2020-09, Joint Research Centre, European Commission (Ispra site).

    More about this item

    Keywords

    International Risk Sharing; Monetary Union; Policy Analysis; Consumption Smoothing; Cross-border Investments;
    All these keywords.

    JEL classification:

    • F01 - International Economics - - General - - - Global Outlook
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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