International and Intranational Risk Sharing
This paper reviews three important issues in the literature on international and intranational risk sharing. First, we establish a comprehensive se t of stylized facts for consumption risk sharing within and across countries. Consistent with the findings in the literature, we find that the correlation of our consumtion measure across countries is much less than that for output. As pointed to by Backu s, Kehoe and Kydland (1993), this constitutes a violation of complete international risk sharing, which they labeled the 'quantity anomaly'. The findings using international data are contrasted with those using intranational data for Japanese prefectures, U .S. states and Canadian regions. Consistent with the findings by Crucini (1998) and Hess and Shin (1997, 1998), intranational data continues to demonstrate the quantity anomaly for the U.S., but not for Japan and Canada. Second, following the work by Crucini (1998), we estimate an econometric specification which allows us to quantify the extent of risk sharing within and across countries. The results indicate that, while still incomplete, a larger fraction of risk is shared within countries than across the m. Finally, using these estimates of the current extent of risk sharing, we calculate the potential welfare benefits from additional international and intranational risk sharing.
|Date of creation:||1999|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cole, Harold L. & Obstfeld, Maurice, 1991.
"Commodity trade and international risk sharing : How much do financial markets matter?,"
Journal of Monetary Economics,
Elsevier, vol. 28(1), pages 3-24, August.
- Harold L. Cole & Maurice Obstfeld, 1989. "Commodity Trade and International Risk Sharing: How Much Do Financial Markets Matter?," NBER Working Papers 3027, National Bureau of Economic Research, Inc.
- Devereux, Michael B. & Gregory, Allan W. & Smith, Gregor W., 1992.
"Realistic cross-country consumption correlations in a two-country, equilibrium, business cycle model,"
Journal of International Money and Finance,
Elsevier, vol. 11(1), pages 3-16, February.
- Michael B. Devereux & Allan W. Gregory & Gregor W. Smith, 1990. "Realistic Cross-Country Consumption Correlations in a Two-Country, Equilibrium, Business Cycle Model," Working Papers 774, Queen's University, Department of Economics.
- Altug, Sumru & Miller, Robert A, 1990.
"Household Choices in Equilibrium,"
Econometric Society, vol. 58(3), pages 543-70, May.
- Sumru Altug & Robert A. Miller, 1987. "Household choices in equilibrium," Working Papers 341, Federal Reserve Bank of Minneapolis.
- Sumru Altug & Robert Miller, . "Household Choices in Equilibrium," University of Chicago - Population Research Center 87-8, Chicago - Population Research Center.
- 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.
- Gregory D. Hess & Kwanho Shin, 1997.
"Risk sharing by households within and across regions and industries,"
Research Working Paper
97-07, Federal Reserve Bank of Kansas City.
- Hess, Gregory D. & Shin, Kwanho, 2000. "Risk sharing by households within and across regions and industries," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 533-560, June.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_227. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)
If references are entirely missing, you can add them using this form.