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Financial Integration and Consumption Comovements in the Nordic Countries

  • Egil Matsen

    ()

    (Department of Economics, Norwegian University of Science and Technology)

  • Øystein Thøgersen

    ()

    (Deptartment of Economics, Norwegian School of Economics and Business Administration, and SNF, Norway.)

The cross-country correlations between annual per capita consumption growth in the Nordic countries (Denmark, Finland, Norway and Sweden) during the period 1973-1996 are much lower than predicted by the basic theory of international financial integration. Capturing that the consumption behavior of parts of the population may be myopic and that some external consumption risks may be uninsured, this paper attempts to shed light on this observation. We find some evidence of myopic consumption behavior in Denmark, Finland and Sweden. Taking this into account, the financial markets of the Nordic economies seem to be well integrated. It proves hard to identify uninsured external consumption risks at the aggregate level.

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Paper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 1502.

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Length: 22 pages
Date of creation: 09 Oct 2000
Date of revision:
Handle: RePEc:nst:samfok:1502
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