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A provincial view of consumption risk sharing: Asset classes as shock absorbers

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  • Victor Pontines

Abstract

Using a unique data set on provincial net factor income flows disaggregated across the three asset classes of debt, equity and FDI reinvested earnings in Korea, we investigated how these asset channels impacted consumption risk sharing during the Global Financial Crisis and the European sovereign debt crisis. Adopting spatial panel methods, this study found that net receipts of debt, equity and FDI retained earnings have all contributed favorably to consumption risk sharing during these crises episodes, with FDI retained earnings robustly positive in its contribution in buffering shocks to consumption. We also found suggestive evidence that net equity receipts rather than net debt receipts contributed more to risk sharing during these episodes. Overall, our results indicate that different asset channels can provide the insurance needed to cushion the economy against adverse shocks.

Suggested Citation

  • Victor Pontines, 2019. "A provincial view of consumption risk sharing: Asset classes as shock absorbers," CAMA Working Papers 2019-23, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2019-23
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2019-03/23_2019_pontines.pdf
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    Cited by:

    1. Joongsan Ko, 2020. "Intranational Consumption Risk Sharing in South Korea: 2000–2016," Asian Economic Journal, East Asian Economic Association, vol. 34(1), pages 29-49, March.

    More about this item

    Keywords

    Consumption risk sharing; Consumption smoothing; Factor income flows; Spatial panel;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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