According to the conventional view on efficient risk sharing (Hirshleifer, 1971), better information on future idiosyncratic income realizations harms risk sharing by evaporating insurance opportunities ex-ante. In our model, risk-averse agents receive public and private signals on future income realizations and engage in insurance contracts with limited enforceability. When considered separately, better public and private signals are detrimental to welfare. In contrast to the conventional view, we show that when private information is sufficiently precise, more informative public signals can improve the allocation of risk. First, more informative public signals increase the riskiness of the consumption allocation, deteriorating risk sharing. Second, however, more informative public signals mitigate the welfare costs of private information and improve risk sharing. When private signals are sufficiently precise, the positive effect of better public information dominates the negative effect. The positive effect of public information can be quantitatively important in international risk sharing.

We provide new evidence on bank ownership and transmission of monetary policy using bank-level data on 453 banks in Central and Eastern European economies between 1998 and 2012. Only domestic banks adjust loans to changes in monetary policy, while foreign banks do not. Conventional wisdom says that this is because foreign banks can rely on parent banks' funding to insulate against monetary policy shocks. In this paper we document an alternative explanation. Deposits in foreign banks do not react to monetary policy, hence the bank lending channel is only triggered in domestic banks. (JEL E50, F36, G21) * We would like to thank Steven Ongena, our Editor, and an anonymous referee for their detailed comments that improved the paper. The paper has benefited from discussions and support from Árpád Ábrahám, Eric Bartelsman

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