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Capital Mobility and International Sharing of Cyclical Risk

  • Julien Bengui
  • Enrique G. Mendoza
  • Vincenzo Quadrini

This paper investigates whether the international globalization of financial markets allows for significant cross-country risk-sharing at the business cycle frequency. We find that cross-country risk-sharing is still limited and this is unlikely to be the result of financial frictions that limit state-contingent contracts. Part of the limited international risk sharing could be the consequence of frictions that de-facto reduce the short-term mobility of financial capital. But even with these frictions we find significant divergence between model predictions and the data.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18372.

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Date of creation: Sep 2012
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Publication status: published as Bengui, Julien & Mendoza, Enrique G. & Quadrini, Vincenzo, 2013. "Capital mobility and international sharing of cyclical risk," Journal of Monetary Economics, Elsevier, vol. 60(1), pages 42-62.
Handle: RePEc:nbr:nberwo:18372
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