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Output Smoothing in EMU and OECD: Can We Forego Government Contribution? A Risk Sharing Approach

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  • Carlos Fonseca Marinheiro

Abstract

This paper analyses the smoothing of asymmetric shocks to output for a sample of OECD countries. It also examines whether the private capital markets will be able to replace the government in providing output smoothing in the euro-area, in the near future. The research finds no evidence of large differences in the patterns of risk sharing for the 19 OECD countries, the EU-15 or euro-area countries, for the period 1970-1999. However, there were shown to be considerable differences between the euro-area and the successful monetary union of the USA: the euro-area showed a much lower insurance of asymmetric shocks than the US states. Until increasing economic integration in Europe does not lead to a substantial decrease in the incidence of idiosyncratic shocks, such shocks may impose non-negligible welfare costs.

Suggested Citation

  • Carlos Fonseca Marinheiro, 2003. "Output Smoothing in EMU and OECD: Can We Forego Government Contribution? A Risk Sharing Approach," CESifo Working Paper Series 1051, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1051
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp1051.pdf
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    References listed on IDEAS

    as
    1. Michael J. Artis & Marco Buti, 2000. "'Close-to-Balance or in Surplus': A Policy-Maker's Guide to the Implementation of the Stability and Growth Pact," Journal of Common Market Studies, Wiley Blackwell, vol. 38(4), pages 563-591, November.
    2. André Sapir & Marco Buti, 1998. "Economic policy in EMU," ULB Institutional Repository 2013/8078, ULB -- Universite Libre de Bruxelles.
    3. Roberto Perotti, 1999. "Fiscal Policy in Good Times and Bad," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1399-1436.
    4. Melitz, Jacques & Zumer, Frederic, 1999. "Interregional and international risk-sharing and lessons for EMU," Carnegie-Rochester Conference Series on Public Policy, Elsevier, pages 149-188.
    5. Giovanni P. Olivei, 2000. "Consumption risk-sharing across G-7 countries," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 3-14.
    6. 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.
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    Citations

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    Cited by:

    1. Emil Stavrev, 2007. "Growth and Inflation Dispersions in EMU; Reasons, the Role of Adjustment Channels, and Policy Implications," IMF Working Papers 07/167, International Monetary Fund.
    2. Jules-Armand Tapsoba, 2009. "West African Monetary Integration and Interstates Risk-Sharing," Post-Print hal-00460111, HAL.
    3. Faruk Balli & Syed Abul Basherz & Rosmy Jean Louis, 2012. "Risk Sharing in the Middle East and North Africa: The Role of Remittances and Factor Incomes," CAMA Working Papers 2012-39, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    4. Mongelli, Francesco Paolo & De Grauwe, Paul, 2005. "Endogeneities of optimum currency areas: what brings countries sharing a single currency closer together?," Working Paper Series 468, European Central Bank.
    5. Henryk Bak & Sebastian Maciejewski, 2015. "Asymmetric shocks and international risk sharing in the European Monetary Union and the European Union," Bank i Kredyt, Narodowy Bank Polski, vol. 46(6), pages 523-564.
    6. Sampawende Jules TAPSOBA, 2009. "Union Monétaire en Afrique de l’Ouest: Quelles Réponses à l’Hétérogénéité des Chocs ?," Working Papers 200912, CERDI.
    7. Sampawende Jules Tapsoba, 2011. "Union Monétaire en Afrique de l'Ouest: Quelles Réponses à l'Hétérogénéité des Chocs ?," Working Papers halshs-00554309, HAL.
    8. Carlos Marinheiro, 2008. "The stability and growth pact, fiscal policy institutions and stabilization in Europe," International Economics and Economic Policy, Springer, pages 189-207.
    9. Bąk Henryk & Maciejewski Sebastian, 2015. "Endogeneity and Specialization in the European Monetary Union," International Journal of Management and Economics, De Gruyter Open, vol. 46(1), pages 7-40, June.
    10. Nnyanzi John Bosco, 2015. "Financial Openness, Capital Flows and Risk Sharing in Africa," Global Economy Journal, De Gruyter, vol. 15(1), pages 51-82, March.

    More about this item

    Keywords

    EMU; output smoothing; risk sharing; international capital markets; economic integration;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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