The Resource Measuring international risk-sharing : theoretical issues and empirical evidence from OECD countries, Francesca Viani

Measuring international risk-sharing : theoretical issues and empirical evidence from OECD countries, Francesca Viani

Label
Measuring international risk-sharing : theoretical issues and empirical evidence from OECD countries
Title
Measuring international risk-sharing
Title remainder
theoretical issues and empirical evidence from OECD countries
Statement of responsibility
Francesca Viani
Creator
Contributor
Subject
Language
eng
Summary
Whether financial market integration raised global insurance is a crucial, still open issue. All empirical methods to measure cross-border risk-sharing are based on the implicit assumption that international prices do not fluctuate in response to business cycle shocks. This paper shows that these methods can be completely misleading in the presence of large fluctuations in international prices as those observed in the data. I then propose a new empirical method that is immune from this issue. The risk-sharing inefficiency between two countries is measured by the wedge between their Stochastic Discount Factors (SDFs). This measure is a proxy for the welfare losses created by imperfect insurance. Welfare losses can be attributed either to the strength of uninsurable shocks (the extent of risk to be pooled) or to the degree of insurance against different sources of risk. The method is applied to study the evolution of risk-sharing between the US and OECD countries, assuming either constant or time-varying risk-aversion. The degree of insurance is found to have improved over time only for some countries and only if SDFs are estimated assuming time-varying risk-aversion. The results are also informative on the implications of different macro models for international risk. When confronted with the data, standard open-macro models (featuring constant risk-aversion) imply that nominal exchange rate fluctuations do not contain wealth divergences across countries, but rather represent an important source of risk. Time-varying risk-aversion instead implies that limiting welfare losses from imperfect risk-sharing requires reducing the volatility of macro fundamentals
Member of
Cataloging source
IT-FiEUI
http://library.link/vocab/creatorName
Viani, Francesca
Index
no index present
Literary form
non fiction
http://library.link/vocab/relatedWorkOrContributorName
European University Institute
Series statement
  • EUI working papers. ECO
  • EUI papers
Series volume
2011/10
http://library.link/vocab/subjectName
  • Organisation for Economic Co-operation and Development
  • Risk management
  • Risk
Label
Measuring international risk-sharing : theoretical issues and empirical evidence from OECD countries, Francesca Viani
Link
http://hdl.handle.net/1814/15956
Instantiates
Publication
Bibliography note
Includes bibliographical references (pages 28-29) and index
Carrier category
volume
Carrier category code
  • nc
Carrier MARC source
rdacarrier.
Content category
text
Content type code
  • txt
Content type MARC source
rdacontent.
Control code
FIEb16970342
Dimensions
30 cm.
Extent
57 pages
Media category
unmediated
Media MARC source
rdamedia.
Media type code
  • n
Other physical details
illustrations
System control number
(OCoLC)772961862
Label
Measuring international risk-sharing : theoretical issues and empirical evidence from OECD countries, Francesca Viani
Link
http://hdl.handle.net/1814/15956
Publication
Bibliography note
Includes bibliographical references (pages 28-29) and index
Carrier category
volume
Carrier category code
  • nc
Carrier MARC source
rdacarrier.
Content category
text
Content type code
  • txt
Content type MARC source
rdacontent.
Control code
FIEb16970342
Dimensions
30 cm.
Extent
57 pages
Media category
unmediated
Media MARC source
rdamedia.
Media type code
  • n
Other physical details
illustrations
System control number
(OCoLC)772961862

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