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Risk Sharing in Currency Unions: The Migration Channel

Author

Listed:
  • Müller, Gernot
  • Kohler, Wilhelm
  • Wellmann, Susanne

Abstract

International risk sharing insulates consumption from country-specific business-cycle fluctuations. This matters for countries in currency unions who lack monetary autonomy. In the spirit of Mundell, we formally integrate migration as a distinct channel into the standard framework used to quantify risk sharing. Comparing the euro area and the US we find that migration contributes significantly to risk sharing across US states, but not across the euro area. We also present survey evidence showing that migration rates are about 20 times higher in the US. The overall amount of risk sharing in the US is higher by a factor of two.

Suggested Citation

  • Müller, Gernot & Kohler, Wilhelm & Wellmann, Susanne, 2021. "Risk Sharing in Currency Unions: The Migration Channel," CEPR Discussion Papers 16178, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16178
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    Cited by:

    1. is not listed on IDEAS
    2. Arvai, Kai, 2024. "The political economy of currency unions," Journal of International Economics, Elsevier, vol. 152(C).
    3. Zhou, Cheng, 2025. "The impact of the belt and road initiative on international consumption risk sharing: A difference-in-differences analysis," International Economics, Elsevier, vol. 181(C).
    4. Markus Sihvonen, 2023. "Equity Home Bias in a Capital Market Union," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(4), pages 953-999, December.

    More about this item

    Keywords

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    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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