Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/diw/diwfin/diwfin4.2.html
   My bibliography  Save this paper

International Consumption Risk Sharing with Incomplete Goods and Asset Markets

Author

Listed:
  • Sven Blank
Abstract
Perfect consumption risk sharing requires both, frictionless goods as well as frictionless financial market integration. This project aims at analyzing the consequences of both type of frictions for the allocation of risk across countries in a unified framework. To this end, the theoretical model by Ghironi and Melitz (2005) is extended to allow for international trade in equities. This setup incorporates impediments to international trade in goods and assets. Impulse responses show that the degree of financial market integration and the time horizon considered, substantially alter the extent of consumption risk sharing depending on the nature of the underlying shock.

Suggested Citation

  • Sven Blank, 2009. "International Consumption Risk Sharing with Incomplete Goods and Asset Markets," Working Paper / FINESS 4.2, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwfin:diwfin4.2
    as

    Download full text from publisher

    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.96138.de/diw_finess_04020.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ghironi, Fabio & Lee, Jaewoo & Rebucci, Alessandro, 2015. "The valuation channel of external adjustment," Journal of International Money and Finance, Elsevier, vol. 57(C), pages 86-114.
    2. Sutherland, Alan & Devereux, Michael B, 2006. "Solving for Country Portfolios in Open Economy Macro Models," CEPR Discussion Papers 5966, C.E.P.R. Discussion Papers.
    3. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    4. Schmitt-Grohe, Stephanie & Uribe, Martin, 2003. "Closing small open economy models," Journal of International Economics, Elsevier, vol. 61(1), pages 163-185, October.
    5. Tille, Cédric & van Wincoop, Eric, 2010. "International capital flows," Journal of International Economics, Elsevier, vol. 80(2), pages 157-175, March.
    6. Sorensen, Bent E. & Wu, Yi-Tsung & Yosha, Oved & Zhu, Yu, 2007. "Home bias and international risk sharing: Twin puzzles separated at birth," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 587-605, June.
    7. Fabio Ghironi & Marc J. Melitz, 2005. "International Trade and Macroeconomic Dynamics with Heterogeneous Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 865-915.
    8. 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.
    9. Cole, Harold L. & Obstfeld, Maurice, 1991. "Commodity trade and international risk sharing : How much do financial markets matter?," Journal of Monetary Economics, Elsevier, vol. 28(1), pages 3-24, August.
    10. Yosha, Oved & Sørensen, Bent E & Kalemli-Özcan, Sebnem, 2004. "Asymmetric Shocks and Risk Sharing in a Monetary Union: Updated Evidence and Policy Implications for Europe," CEPR Discussion Papers 4463, C.E.P.R. Discussion Papers.
    11. Maurice Obstfeld & Kenneth Rogoff, 2001. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 339-412, National Bureau of Economic Research, Inc.
    12. Martin D. D. Evans & Viktoria Hnatkovska, 2005. "Solving General Equilibrium Models with Incomplete Markets and Many Assets," NBER Technical Working Papers 0318, National Bureau of Economic Research, Inc.
    13. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    14. Andrew B. Bernard & J. Bradford Jensen, 2004. "Why Some Firms Export," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 561-569, May.
    15. Doireann Fitzgerald, 2012. "Trade Costs, Asset Market Frictions, and Risk Sharing," American Economic Review, American Economic Association, vol. 102(6), pages 2700-2733, October.
    16. Tille, Cedric, 2005. "The welfare effect of international asset market integration under nominal rigidities," Journal of International Economics, Elsevier, vol. 65(1), pages 221-247, January.
    17. Kalemli-Ozcan, Sebnem & Sørensen, Bent E & Yosha, Oved, 2004. "Asymmetric Shocks and Risk Sharing in a Monetary Union: Updated Evidence and Policy Implications for Europe," CEPR Discussion Papers 4463, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sven Blank, 2009. "Research Note on "International Consumption Risk Sharing and Monetary Policy"," Working Paper / FINESS 4.3, DIW Berlin, German Institute for Economic Research.
    2. Beck, Krzysztof & Yersh, Valeryia, 2024. "Economic integration and consumption risk sharing: A comparison of Eurozone and OECD countries," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 784-803.
    3. repec:diw:diwfin:diwfin04030 is not listed on IDEAS

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sven Blank, 2009. "International Consumption Risk Sharing and Monetary Policy," Working Paper / FINESS 4.4, DIW Berlin, German Institute for Economic Research.
    2. repec:diw:diwfin:diwfin04040 is not listed on IDEAS
    3. Mukherjee, Rahul, 2015. "Institutions, Corporate Governance and Capital Flows," Journal of International Economics, Elsevier, vol. 96(2), pages 338-359.
    4. Hamano, Masashige, 2013. "The consumption-real exchange rate anomaly with extensive margins," Journal of International Money and Finance, Elsevier, vol. 36(C), pages 26-46.
    5. Coeurdacier, Nicolas, 2009. "Do trade costs in goods market lead to home bias in equities?," Journal of International Economics, Elsevier, vol. 77(1), pages 86-100, February.
    6. Jonathan Heathcote & Fabrizio Perri, 2013. "The International Diversification Puzzle Is Not as Bad as You Think," Journal of Political Economy, University of Chicago Press, vol. 121(6), pages 1108-1159.
    7. Coeurdacier, Nicolas & Kollmann, Robert & Martin, Philippe, 2010. "International portfolios, capital accumulation and foreign assets dynamics," Journal of International Economics, Elsevier, vol. 80(1), pages 100-112, January.
    8. Naknoi, Kanda, 2008. "Real exchange rate fluctuations, endogenous tradability and exchange rate regimes," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 645-663, April.
    9. Hamano, Masashige, 2022. "International risk sharing with heterogeneous firms," Journal of International Money and Finance, Elsevier, vol. 120(C).
    10. Fattal Jaef, Roberto N. & Lopez, Jose Ignacio, 2014. "Entry, trade costs, and international business cycles," Journal of International Economics, Elsevier, vol. 94(2), pages 224-238.
    11. Nicolas Coeurdacier & Robert Kollmann & Philippe Martin, 2009. "International Portfolios with Supply, Demand, and Redistributive Shocks," NBER Chapters, in: NBER International Seminar on Macroeconomics 2007, pages 231-263, National Bureau of Economic Research, Inc.
    12. repec:hal:wpspec:info:hdl:2441/c8dmi8nm4pdjkuc9g7485ckbm is not listed on IDEAS
    13. repec:spo:wpmain:info:hdl:2441/c8dmi8nm4pdjkuc9g7485ckbm is not listed on IDEAS
    14. repec:hal:spmain:info:hdl:2441/c8dmi8nm4pdjkuc9g7485ckbm is not listed on IDEAS
    15. Robert Kollmann & Nicolas Coeurdacier & Philippe Martin, 2008. "International portfolios, current account dynamics and capital accumulation," ULB Institutional Repository 2013/13410, ULB -- Universite Libre de Bruxelles.
    16. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g7485ckbm is not listed on IDEAS
    17. Nicolas Coeurdacier & Robert Kollmann & Philippe Martin, 2009. "International Portfolios with Supply, Demand, and Redistributive Shocks," NBER Chapters, in: NBER International Seminar on Macroeconomics 2007, pages 231-263, National Bureau of Economic Research, Inc.
    18. Ghironi, Fabio & Lee, Jaewoo & Rebucci, Alessandro, 2015. "The valuation channel of external adjustment," Journal of International Money and Finance, Elsevier, vol. 57(C), pages 86-114.
    19. Coeurdacier, Nicolas & Gourinchas, Pierre-Olivier, 2016. "When bonds matter: Home bias in goods and assets," Journal of Monetary Economics, Elsevier, vol. 82(C), pages 119-137.
    20. Nicolas Coeurdacier & Hélène Rey, 2013. "Home Bias in Open Economy Financial Macroeconomics," Journal of Economic Literature, American Economic Association, vol. 51(1), pages 63-115, March.
    21. Hamano, Masashige, 2015. "International equity and bond positions in a DSGE model with variety risk in consumption," Journal of International Economics, Elsevier, vol. 96(1), pages 212-226.
    22. Christoph Thoenissen & Gianluca Benigno, 2004. "On the consumption real exchange rate anomaly," 2004 Meeting Papers 533, Society for Economic Dynamics.
    23. Gianluca Benigno & Hande Küçük, 2012. "Portfolio allocation and international risk sharing," Canadian Journal of Economics, Canadian Economics Association, vol. 45(2), pages 535-565, May.
    24. Pavlova, Anna & Rigobon, Roberto, 2010. "An asset-pricing view of external adjustment," Journal of International Economics, Elsevier, vol. 80(1), pages 144-156, January.
    25. Nicolas Coeurdacier & Robert Kollmann & Philippe Martin, 2007. "Return Volatility and International Portfolio Choice," 2007 Meeting Papers 474, Society for Economic Dynamics.

    More about this item

    Keywords

    International portfolio choice; consumption risk sharing; trade frictions; financial market frictions;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:diw:diwfin:diwfin4.2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bibliothek (email available below). General contact details of provider: https://edirc.repec.org/data/diwbede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.