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Globalisation and consumption risk-sharing in emerging market economies

In: Globalisation and deglobalisation

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  • Manuel Ramos-Francia

    (Bank of Mexico)

  • Santiago García-Verdú

    (Bank of Mexico)

Abstract

Our aim is to explore how globalisation has affected consumption risk-sharing in emerging market economies. To that end, we implement a consumption risk-sharing test, using the Barro-Ursua Macroeconomic data set. Its span lets us explore historic episodes in which globalisation has markedly changed. We account for risk aversion heterogeneity by using the economies’ estimates of their relative risk aversion coefficients, and for subjective discount factor heterogeneity by estimating panel regressions with fixed effects. Specifically, we explore risk-sharing in emerging market and advanced economies as two groups, and by geographic regions. In most cases, we reject full insurance. However, advanced economies seem to have achieved full insurance in more recent periods. At a regional level, Europe and Asia appear to have attained such a result as well.

Suggested Citation

  • Manuel Ramos-Francia & Santiago García-Verdú, 2018. "Globalisation and consumption risk-sharing in emerging market economies," BIS Papers chapters,in: Bank for International Settlements (ed.), Globalisation and deglobalisation, volume 100, pages 231-244 Bank for International Settlements.
  • Handle: RePEc:bis:bisbpc:100-15
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    References listed on IDEAS

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    4. M. Ayhan Kose & Christopher Otrok & Eswar Prasad, 2012. "Global Business Cycles: Convergence Or Decoupling?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 511-538, May.
    5. François Bourguignon, 2015. "The Globalization of Inequality," Economics Books, Princeton University Press, edition 1, number 10433, December.
    6. Hayashi, Fumio & Altonji, Joseph & Kotlikoff, Laurence, 1996. "Risk-Sharing between and within Families," Econometrica, Econometric Society, vol. 64(2), pages 261-294, March.
    7. Del Negro, Marco, 2002. "Asymmetric shocks among U.S. states," Journal of International Economics, Elsevier, vol. 56(2), pages 273-297, March.
    8. Rangvid, Jesper & Santa-Clara, Pedro & Schmeling, Maik, 2016. "Capital market integration and consumption risk sharing over the long run," Journal of International Economics, Elsevier, vol. 103(C), pages 27-43.
    9. Cochrane, John H, 1991. "A Simple Test of Consumption Insurance," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 957-976, October.
    10. Canova, Fabio & Ravn, Morten O, 1996. "International Consumption Risk Sharing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 573-601, August.
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