International Risk Sharing with Endogenously Segmented Asset Markets
Asset price data imply a large degree international risk sharing, while aggregate consumption data do not. We evaluate how well a model with fixed costs of exchanging money for assets can account for this discrepancy. In our model, households receive idiosyncratic income shocks, and only a fraction of households adjust their asset holdings each period. These households share risk within and across countries, and their marginal utilities price assets, so asset prices imply high international risk sharing. Inactive households do not share risk, so aggregate consumption reflects low risk sharing. Quantitatively, this mechanism depends on the degree of asset market segmentation, which we choose so that the cross-sectional dispersion of consumption relative to income matches that in US data.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David K. Backus & Gregor W. Smith, 1993.
"Consumption and Real Exchange Rates in Dynamic Economies with Non-Traded Goods,"
1252, Queen's University, Department of Economics.
- Backus, David K. & Smith, Gregor W., 1993. "Consumption and real exchange rates in dynamic economies with non-traded goods," Journal of International Economics, Elsevier, vol. 35(3-4), pages 297-316, November.
- Alan C. Stockman & Linda L. Tesar, 1990.
"Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements,"
NBER Working Papers
3566, National Bureau of Economic Research, Inc.
- Stockman, Alan C & Tesar, Linda L, 1995. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements," American Economic Review, American Economic Association, vol. 85(1), pages 168-85, March.
- Alan C. Stockman & Linda L. Tesar, 1991. "Tastes and technology in a two-country model of the business cycle: explaining international co-movements," Working Paper 9019, Federal Reserve Bank of Cleveland.
- Chatterjee, Satyajit & Corbae, Dean, 1992.
"Endogenous Market Participation and the General Equilibrium Value of Money,"
Journal of Political Economy,
University of Chicago Press, vol. 100(3), pages 615-46, June.
- Chatterjee, S. & Corbae, D., 1990. "Endogenous Market Participation and the General Equelibrium Value of Money," Working Papers 90-30a, University of Iowa, Department of Economics.
- Yosef Bonaparte & Russell Cooper, 2009. "Costly Portfolio Adjustment," NBER Working Papers 15227, National Bureau of Economic Research, Inc.
- Kollmann, Robert, 2009.
"Limited Asset Market Participation and the Consumption-Real Exchange Rate Anomaly,"
CEPR Discussion Papers
7452, C.E.P.R. Discussion Papers.
- Robert Kollmann, 2012. "Limited asset market participation and the consumption-real exchange rate anomaly," Canadian Journal of Economics, Canadian Economics Association, vol. 45(2), pages 566-584, May.
- Robert Kollmann, 2010. "Limited asset market participation and the consumption-real exchange rate anomaly," Globalization and Monetary Policy Institute Working Paper 41, Federal Reserve Bank of Dallas.
When requesting a correction, please mention this item's handle: RePEc:red:sed011:853. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.