International Risk Sharing and Globalization

Pierucci, Eleonora; Ventura, Luigi

doi:10.2139/ssrn.1982743

Cited by 6 publications

(4 citation statements)

References 26 publications

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“…Another issue to be addressed is that economic theory also predicts full international risk sharing (i.e., perfect consumption smoothing across countries and states of nature) in the hypothesis of complete markets (Obstfeld and Rogoff, 1996). 4 However, the empirical literature has systematically rejected the null hypothesis of complete risk sharing, acknowledging a much larger degree of risk sharing within countries than cross-countries (Crucini and Hess, 2000;Kose et al, 2003Kose et al, , 2007Kose et al, , 2009 and 2011; Asdrubali and Kim, 2008;Broner andVentura, 2011, Pierucci andVentura, 2012). Last but not least, this work focuses on consumption (and saving) behaviour as key tools in explaining household's choices under uncertainty.…”

Section: Background Aims and Caveatsmentioning

confidence: 93%

Macroeconomic Volatility, Consumption Behaviour and Welfare: A Cross-Country Analysis

Federici¹,

Montalbano

2012

SSRN Journal

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This work presents a robust empirical approach to dealing with the issue of the long run relationship between macroeconomic volatility, consumption behaviour and welfare for a large sample of countries. Differing from previous works, our empirical strategy is grounded on consumption and takes account of the role of persistence in consumption/income volatility. Our main conclusion is twofold: on one hand, we determine that aggregate volatility exerts, on average and ceteris paribus, a significant impact in deviating consumption from its smoothing path, producing aggregate extra saving, and in hampering future consumption prospects. This relationship holds across countries, including the poorest ones, and is becoming more significant in recent years. On the other hand, by deliberately proposing conservative estimates, we confirm Lucas' (1987) intuition about the low value of stabilisation policies, both across-countries and in the long-run. Our empirical evidence provides new insights into the long standing debate about the costs of fluctuations. First, it shows that the poorest countries hold a significant amount of "extra saving" too, because of economic fluctuations. Second, it underlies that, on average, uncertainty affects not only the volatility of consumption around its mean but the mean itself (Elbers and Gunning, 2003).

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Section: Background Aims and Caveatsmentioning

confidence: 93%

Macroeconomic Volatility, Consumption Behaviour and Welfare: A Cross-Country Analysis

Federici¹,

Montalbano

2012

SSRN Journal

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“…Globalisation increased international risk sharing. Pierucci and Ventura (, p. 1) conclude that ‘economic and social integration help to better cope with idiosyncratic risk, but also that without political integration this might result in an increasing exposure to (uninsurable) risk’. Economic globalisation increased the probability of banking crises (Klomp, ).…”

Section: Introductionmentioning

confidence: 99%

“…The results show that globalisation was somewhat negatively correlated with the first difference of the overall credit market deregulation indicator between 1995 and 2005, indicating that globalisation induced credit market regulation. The studies by Heinemann and Tanz (), Aggarwal and Goodell (), Klomp () and Pierucci and Ventura () do, however, not deal with reverse causality. But, causality between globalisation and credit market deregulation may be reverse: it is conceivable that deregulated credit markets, for example, attract foreign investment.…”

Section: Introductionmentioning

confidence: 99%

Did Globalisation Influence Credit Market Deregulation?

Eppinger

Potrafke

2015

World Economy

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We investigate whether globalisation influenced credit market deregulation over the period 1970–2010. Globalisation is measured by the KOF indices of globalisation. Credit market deregulation is measured by the credit market freedom indicators of the Fraser Institute. The results from both cross‐sectional and panel regressions using ordinary least squares indicate a positive correlation between globalisation and credit market deregulation. We account for reverse causality using predicted trade openness as an instrumental variable and show that this approach gives rise to different conclusions. Two‐stage least squares estimations do not show that globalisation had a causal influence on credit market deregulation.

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“…The results show that globalization was somewhat negatively correlated with the first difference of the overall credit market deregulation indicator between 1995 and 2005, indicating that globalization induced credit market regulation. The studies by Aggarwal and Goodell (2009), Pierucci and Ventura (2012), Klomp (2010) and Heinemann and Tanz (2008) do however not deal with reverse causality. Causality between globalization and credit market deregulation may be reverse: it is conceivable that deregulated credit markets, for example, attract foreign investment.…”

Section: Introductionmentioning

confidence: 99%