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Incomplete Intertemporal Consumption Smoothing and Incomplete Risksharing

  • Pierfederico Asdrubali

    (John Cabot University)

  • Soyoung Kim

    ()

    (Department of Economics, Korea University)

This paper develops a method to estimate jointly the degree of intertemporal consumption smoothing and the degree of ¡±interregional¡± risksharing. The empirical results for the US states and OECD and EU countries suggest that: 1) regardless of the assumption on the degree of intertemporal consumption smoothing, the degree of risksharing within a country is larger than across countries; 2) the degree of intertemporal consumption smoothing within a country is also larger than across countries; 3) The difference between the degree of intertemporal consumption smoothing within US states and across OECD and EU countries is as large as the difference between the degree of risksharing, contrary to the findings of some past studies.

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File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w0725.pdf
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Paper provided by Institute of Economic Research, Korea University in its series Discussion Paper Series with number 0725.

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Length: 28 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:iek:wpaper:0725
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  1. Maurice Obstfeld, 1993. "Are Industrial-Country Consumption Risks Globally Diversified?," NBER Working Papers 4308, National Bureau of Economic Research, Inc.
  2. Baxter, M. & Crucini, M., 1991. "Business Cycles and the Asset Structure of Foreign Trade," RCER Working Papers 316, University of Rochester - Center for Economic Research (RCER).
  3. Ostergaard, Charlotte & Sørensen, Bent E & Yosha, Oved, 2001. "Consumption and Aggregate Constraints: Evidence from US States and Canadian Provinces," CEPR Discussion Papers 2947, C.E.P.R. Discussion Papers.
  4. Campbell, John Y, 1987. "Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis," Econometrica, Econometric Society, vol. 55(6), pages 1249-73, November.
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  6. Melitz, Jacques & Zumer, Frédéric, 1999. "Interregional and International Risk Sharing and Lessons for EMU," CEPR Discussion Papers 2154, C.E.P.R. Discussion Papers.
  7. Michener, Ron, 1984. "Permanent income in general equilibrium," Journal of Monetary Economics, Elsevier, vol. 13(3), pages 297-305, May.
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  9. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1991. "International real business cycles," Staff Report 146, Federal Reserve Bank of Minneapolis.
  10. Pierfederico Asdrubali & Soyoung Kim, 2000. "Dynamic Risk Sharing in the United States and Europe," Econometric Society World Congress 2000 Contributed Papers 1621, Econometric Society.
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  12. Asdrubali, Pierfederico & Sorensen, Bent E & Yosha, Oved, 1996. "Channels of Interstate Risk Sharing: United States 1963-1990," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1081-1110, November.
  13. Cochrane, John H, 1991. "A Simple Test of Consumption Insurance," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 957-76, October.
  14. Carroll, Christopher D, 1997. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 1-55, February.
  15. Asdrubali, Pierfederico & Kim, Soyoung, 2008. "On the empirics of international smoothing," Journal of Banking & Finance, Elsevier, vol. 32(3), pages 374-381, March.
  16. Mario J Crucini & Gregory D Hess, 1999. "International and Intranational Risk Sharing," CESifo Working Paper Series 227, CESifo Group Munich.
  17. N. Gregory Mankiw & Julio J. Rotemberg & Lawrence H. Summers, 1982. "Intertemporal Substitution in Macroeconomics," NBER Working Papers 0898, National Bureau of Economic Research, Inc.
  18. Tamim Bayoumi & Michael W. Klein, 1997. "A Provincial View of Economic Integration," IMF Staff Papers, Palgrave Macmillan, vol. 44(4), pages 534-556, December.
  19. Mace, Barbara J, 1991. "Full Insurance in the Presence of Aggregate Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 928-56, October.
  20. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244, March.
  21. Marianne Baxter & Urban J. Jermann, 1999. "Household Production and the Excess Sensitivity of Consumption to Current Income," NBER Working Papers 7046, National Bureau of Economic Research, Inc.
  22. Campbell, John Y. & Mankiw, N. Gregory, 1990. "Permanent Income, Current Income, and Consumption," Scholarly Articles 3353762, Harvard University Department of Economics.
  23. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
  24. Campbell, John & Deaton, Angus, 1989. "Why Is Consumption So Smooth?," Scholarly Articles 3221494, Harvard University Department of Economics.
  25. Baxter, M., 1994. "International Trade and Business Cycles," RCER Working Papers 390, University of Rochester - Center for Economic Research (RCER).
  26. Fabio Canova & Morten O. Ravn, 1993. "International consumption risk sharing," Economics Working Papers 135, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 1995.
  27. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
  28. Hess, Gregory D & Shin, Kwanho, 1997. "International and Intranational Business Cycles," Oxford Review of Economic Policy, Oxford University Press, vol. 13(3), pages 93-109, Autumn.
  29. Lewis, Karen K, 1996. "What Can Explain the Apparent Lack of International Consumption Risk Sharing?," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 267-97, April.
  30. Sorensen, B-E & Yosha, O, 1996. "International Risk Sharing and European Monetary Unification," Papers 40-96, Tel Aviv.
  31. Luca Dedola & Stefano Usai & Marco Vannini, 1999. "An assessment of regional risk sharing in Italy and the United Kingdom," Chapters, in: Economic Growth and Change, chapter 15 Edward Elgar.
  32. Flavin, Marjorie A, 1981. "The Adjustment of Consumption to Changing Expectations about Future Income," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 974-1009, October.
  33. Hayashi, Fumio & Altonji, Joseph & Kotlikoff, Laurence, 1996. "Risk-Sharing between and within Families," Econometrica, Econometric Society, vol. 64(2), pages 261-94, March.
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