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| Title: | | International risk-taking, volatility, and consumption growth  |
| Authors: | | Giduskova, Maria Larrain, Borja |
| Issue Date: | | 2006 |
| Series/Report no.: | | Working paper series // Federal Reserve Bank of Boston 06-17 |
| Abstract: | | We show that countries that take on more international risk are rewarded with higher expected consumption growth. International risk is defined as the beta of a country's consumption growth with world consumption growth. High-beta countries hold more foreign assets, as predicted by the theory. Despite the positive effects of beta, a country's idiosyncratic volatility is negatively correlated with expected consumption growth. Therefore, uninsured shocks affect not only current growth, but also future consumption growth. High-volatility countries have worse net foreign asset positions, suggesting that solvency constraints limit their future growth. |
| JEL: | | E21 F3 G1 O16 O4 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Working Paper Series, Federal Reserve Bank of Boston
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