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Banks, Financial Markets and International Consumption Risk Sharing

Listed author(s):
  • Markus Leibrecht
  • Johann Scharler

In this paper we empirically explore how characteristics of the domestic financial system in uence the international allocation of consumption risk using a sample of OECD countries. Our results show that the extent of risk sharing achieved does not depend on the overall development of the domestic financial system per se. Rather, it depends on how the financial system is organized. Speciffcally, we find that coun- tries characterized by developed financial markets are less exposed to idiosyncratic risk, whereas the development of the banking sector contributes little to the inter- national diversification of consumption risk.

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File URL: http://www.econ.jku.at/papers/2010/wp1015.pdf
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Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2010-15.

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Length: 25 pages
Date of creation: Dec 2010
Handle: RePEc:jku:econwp:2010_15
Contact details of provider: Fax: +43 732-2468-8238
Web page: http://www.econ.jku.at/

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  1. Karen K. Lewis, 1999. "Trying to Explain Home Bias in Equities and Consumption," Journal of Economic Literature, American Economic Association, vol. 37(2), pages 571-608, June.
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  11. Fratzscher, Marcel & Imbs, Jean, 2009. "Risk sharing, finance, and institutions in international portfolios," Journal of Financial Economics, Elsevier, vol. 94(3), pages 428-447, December.
  12. Yuliya Demyanyk & Charlotte Ostergaard & Bent E. Sørensen, 2007. "U.S. Banking Deregulation, Small Businesses, and Interstate Insurance of Personal Income," Journal of Finance, American Finance Association, vol. 62(6), pages 2763-2801, December.
  13. García-Herrero, Alicia & Vázquez, Francisco, 2013. "International diversification gains and home bias in banking," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2560-2571.
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  23. repec:hrv:faseco:30728041 is not listed on IDEAS
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