International Risk Sharing During the Globalization Era

By Akito Matsumoto, Robert P Flood, Nancy P. Marion

September 1, 2009

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Format: Chicago

Akito Matsumoto, Robert P Flood, and Nancy P. Marion International Risk Sharing During the Globalization Era, (USA: International Monetary Fund, 2009) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Though theory suggests financial globalization should improve international risk sharing, empirical support has been limited. We develop a simple welfare-based measure that captures how far countries are from the ideal of perfect risk sharing. We then take it to data and find international risk sharing has, indeed, improved during globalization. Improved risk sharing comes mostly from the convergence in rates of consumption growth among countries rather than from synchronization of consumption at the business cycle frequency. Our finding explains why many existing measures fail to detect improved risk sharing-they focus only on risk sharing at the business cycle frequency.

Subject: Consumption, Emerging and frontier financial markets, Income, Private consumption, Production growth

Keywords: WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/209
Stock No:

WPIEA2009209
ISBN:

9781451873566
ISSN:

1018-5941

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