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Growth Uncertainty and Risksharing

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  • Athanasoulis, Stefano G.
  • Wincoop, Eric van

Abstract

How large are potential benefits from global risksharing? In order to answer this question we propose a new methodology that is closely connected with the empirical growth literature. We obtain estimates of residual risk (growth uncertainty) at various horizons from regressions of country-specific growth in deviation from, world growth on a wide set of variables in the information set. Since this residual risk can be entirely hedged through risksharing, we use it to obtain a measure of the potential welfare gain'for' a representative country. We find that nations can reap very large benefits from, engaging in such risksharing arrangements.

Suggested Citation

  • Athanasoulis, Stefano G. & Wincoop, Eric van, 1997. "Growth Uncertainty and Risksharing," ISU General Staff Papers 199702010800001039, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:199702010800001039
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