Determinants of international consumption risk sharing in developing countries

Arbeitspapier

Complete financial markets allow countries to share their consumption risks internationally, thereby creating welfare gains through lower volatility of aggregate consumption. This paper empirically looks at international consumption risk sharing and its determinants in a panel of 120 countries from 1970 to 2014. Contrary to some previous studies, I show that financial liberalization and financial integration has a significantly positive impact on international consumption risk sharing in poorer developing countries, whereas in emerging market countries only capital account openness has an impact. Moreover, there is some evidence that high income inequality or a high share of low income individuals reduces consumption smoothing in less developed countries. Lack of financial reforms, a lower degree of financial integration and higher inequality can thus partly explain why the degree of risk sharing is lower in developing countries than in advanced economies.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IFN Working Paper ; No. 1261

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Institutions and the Macroeconomy ; Macroeconomics: Consumption; Saving; Wealth ; Financial Markets and the Macroeconomy ; International Financial Policy: Financial Transactions Tax; Capital Controls ; Economic Impacts of Globalization: Macroeconomic Impacts ; International Financial Markets
• Subject: International consumption risk sharing ; Financial liberalization ; Financial integration ; Inequality ; Panel data

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gardberg, Malin
• Event: Veröffentlichung
• (who): Research Institute of Industrial Economics (IFN)
• (where): Stockholm
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/210902
• Last update: 10.03.2025, 11:41 AM CET