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Consumption Smoothing Across States and Time: International Insurance vs. Foreign Loans

  • von Furstenberg, George M.

When countries, and macroeconomic models, open up to international capital markets, the welfare gains available through completion of financial markets for contingencies potentially are much greater than those available from access to noncontingent international borrowing. Intercasual insurance, reducing exposure to differences in contingent future cases, and not intertemporal smoothing between now and then is the big story in open economies although the two must be told together.

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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2004,13.

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Date of creation: 2004
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Handle: RePEc:zbw:bubdp1:2158
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  10. Jean Tirole, 2003. "Inefficient Foreign Borrowing: A Dual- and Common-Agency Perspective," American Economic Review, American Economic Association, vol. 93(5), pages 1678-1702, December.
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  12. Saul Pleeter & John T. Warner, 2001. "The Personal Discount Rate: Evidence from Military Downsizing Programs," American Economic Review, American Economic Association, vol. 91(1), pages 33-53, March.
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  14. Prati, A. & Schinasi, G.J., 1999. "Financial Stability in European Economic and Monetary Union," Princeton Studies in International Economics 86, International Economics Section, Departement of Economics Princeton University,.
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