International risk-taking, volatility, and consumption growth

Arbeitspapier

We show that countries that take on more international risk are rewarded with higher expected consumption growth. International risk is defined as the beta of a country's consumption growth with world consumption growth. High-beta countries hold more foreign assets, as predicted by the theory. Despite the positive effects of beta, a country's idiosyncratic volatility is negatively correlated with expected consumption growth. Therefore, uninsured shocks affect not only current growth, but also future consumption growth. High-volatility countries have worse net foreign asset positions, suggesting that solvency constraints limit their future growth.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers ; No. 06-17

Classification and Topics

• Classification: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Giduskova, Maria ; Larrain, Borja
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Boston
• (where): Boston, MA
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/55550
• Last update: 07.03.2025, 11:58 AM CET