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Risk sharing in Europe: new empirical evidence on the capital markets channel

Author

Listed:
  • Gilles Dufrénot

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Jean-Baptiste Gossé

    (DGSEI DPEM - Banque de France, Direction générale des Statistiques, des Études et de l'International)

  • Caroline Clerc

    (Banque de France - ACPR)

Abstract

This paper assesses the effectiveness of risk sharing mechanisms in Europe by breaking down the factor income components into their sub-components, and aims to further examine whether financial integration and international portfolio diversification boosts or dampens risk sharing. Using a panel of European countries, we compare the years before and after the 2008 financial crisis. We extend the literature by properly taking into account the heterogeneity (in both country and time dimensions) in the panel through new econometric models. Our results show that financial income has become a major channel of risk sharing in recent years and that a higher integration in the bond and equity markets significantly improves risk sharing in the long term.

Suggested Citation

  • Gilles Dufrénot & Jean-Baptiste Gossé & Caroline Clerc, 2021. "Risk sharing in Europe: new empirical evidence on the capital markets channel," Post-Print hal-02978130, HAL.
    • Handle: RePEc:hal:journl:hal-02978130
    DOI: 10.1080/00036846.2020.1804052
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    Cited by:

    1. Gossé, Jean-Baptiste & Jehle, Camille, 2024. "Benefits of diversification in EU capital markets: Evidence from stock portfolios," Economic Modelling, Elsevier, vol. 135(C).
    2. Stoupos, Nikolaos & Kiohos, Apostolos, 2022. "Bond markets integration in the EU: New empirical evidence from the Eastern non-euro member-states," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).
    3. Beck, Krzysztof & Yersh, Valeryia, 2024. "Economic integration and consumption risk sharing: A comparison of Eurozone and OECD countries," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 784-803.
    4. Afonso, António & Alves, José & Beck, Krzysztof & Jackson, Karen, 2024. "Financial, institutional, and macroeconomic determinants of cross-country portfolio equity flows: The case of developed countries," Economic Modelling, Elsevier, vol. 141(C).

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    Keywords

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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