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International risk sharing in the short run and in the long run

International risk sharing in the short run and in the long run
International risk sharing in the short run and in the long run
Using a panel of 23 industrialised countries, the paper investigates how short-run and long-run income risks are shared and how the source of uncertainty matters for the way this risk gets insured. Surprisingly, short-term and long-term output risks are found to be equally well insured. Transitory shocks get smoothed almost completely whereas permanent shocks remain 80 percent uninsured. We find a somewhat more important role for international capital markets than earlier studies. Whereas our results tie in with some recent theoretical insights and are consistent with empirical findings on home bias in international portfolios, they raise the question why permanent shocks are so hard to insure internationally.
international consumption risk sharing, European integration, panel data, panel vector autoregressions
102
University of Southampton
Becker, Sascha O.
ee541702-65a8-4419-bbc9-d04433be0536
Hoffmann, Mathias
b40fe4f6-c63c-472c-ab67-52702d1f9b00
Becker, Sascha O.
ee541702-65a8-4419-bbc9-d04433be0536
Hoffmann, Mathias
b40fe4f6-c63c-472c-ab67-52702d1f9b00

Becker, Sascha O. and Hoffmann, Mathias (2001) International risk sharing in the short run and in the long run (Discussion Papers in Economics and Econometrics, 102) Southampton, UK. University of Southampton 21pp.

Record type: Monograph (Discussion Paper)

Abstract

Using a panel of 23 industrialised countries, the paper investigates how short-run and long-run income risks are shared and how the source of uncertainty matters for the way this risk gets insured. Surprisingly, short-term and long-term output risks are found to be equally well insured. Transitory shocks get smoothed almost completely whereas permanent shocks remain 80 percent uninsured. We find a somewhat more important role for international capital markets than earlier studies. Whereas our results tie in with some recent theoretical insights and are consistent with empirical findings on home bias in international portfolios, they raise the question why permanent shocks are so hard to insure internationally.

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More information

Published date: 2001
Keywords: international consumption risk sharing, European integration, panel data, panel vector autoregressions

Identifiers

Local EPrints ID: 33096
URI: https://eprints.soton.ac.uk/id/eprint/33096
PURE UUID: 60a7a3a4-5960-475a-82e8-d4197976806b

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Date deposited: 18 May 2006
Last modified: 17 Jul 2017 15:54

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