Partial consumption insurance and financial openness across the world, Volume 1
 
Author:Hevia, Constantino; Serven, Luis; Country:World;
Date Stored:2013/06/12Document Date:2013/06/01
Document Type:Policy Research Working PaperSubTopics:Emerging Markets; Debt Markets; Labor Policies; Insurance & Risk Mitigation; Financial Intermediation
Language:EnglishMajor Sector:Finance
Rel. Proj ID:1W-Capital Flows And Financial Integration -- -- P053639;Region:The World Region
Report Number:WPS6479Sub Sectors:General finance sector
Collection Title:Policy Research working paper ; no. WPS 6479TF No/Name:TF092859-KCP - CAPITAL RAISING ACTIVITY IN DOMESTIC AND INTERNATIONAL MARKETS; TF098583-KCP II - On the use of domestic and international debt markets; BBRSB-BB RESEARCH SUPPORT BUDGET; TF040198-WORLD:; TF094565-KCP II - GLOBALIZATION, RISK, AND CRISES; TF010688-KCP II - Understanding Capital Flows to Developing Countries; TF040145-WORLD:; TF092864-CAUSES AND CONSEQUENCES OF MACROECONOMIC VOLATILITY
Volume No:1  

Summary: This paper examines the extent of international consumption risk sharing for a group of 50 industrial and developing countries. The analysis is based on the empirical implementation of a model of partial consumption insurance whose parameters have the natural interpretation of coefficients of partial risk sharing even when the null hypothesis of perfect risk sharing is rejected. Estimation results show that rich countries exhibit higher degrees of risk sharing than developing countries, and that the gap between both country groups appears to have widened over the period of financial globalization. Moreover, the pattern of consumption risk sharing is related to the degree of financial openness: countries with larger stocks of foreign assets or liabilities exhibit larger degrees of risk sharing. Furthermore, countries whose foreign asset stocks are more tilted towards foreign direct investment assets also show higher degrees of consumption risk sharing.

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