Arbeitspapier
International risk sharing with endogenously segmented asset markets
Asset price data imply a large degree of international risk sharing, while aggregate consumption data do not. We evaluate whether a model with trade in goods and endogenously segmented asset markets accounts for this puzzling discrepancy. Active households pay a fixed cost to transfer income into or out of assets. These households share risk within and across countries, and their marginal utility growth prices assets, so asset prices imply high international risk sharing. Inactive households consume current income and do not share risk, so aggregate consumption (which averages across all households) re.ects lower risk sharing. Trade in goods is essential for generating these differences in the asset price-based and the consumption-based measures of risk sharing. Indeed, without trade, consumption is constrained by domestic resources and there is no international risk sharing. The calibrated model predicts risk sharing measures in line with data, and also partly resolves the Backus-Smith-Kollmann puzzle.
- Language
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Englisch
- Bibliographic citation
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Series: Research Report ; No. 2017-1
- Classification
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Wirtschaft
Financial Aspects of Economic Integration
International Business Cycles
International Financial Markets
- Subject
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international risk sharing
real exchange rates
segmented asset markets
limited asset market participation
consumption-real exchange rate anomaly
Backus-Smith-Kollmann puzzle
- Event
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Geistige Schöpfung
- (who)
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Cociuba, Simona E.
Ramanarayanan, Ananth
- Event
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Veröffentlichung
- (who)
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The University of Western Ontario, Department of Economics
- (where)
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London (Ontario)
- (when)
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2017
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Cociuba, Simona E.
- Ramanarayanan, Ananth
- The University of Western Ontario, Department of Economics
Time of origin
- 2017
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