Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/55550
Authors: 
Giduskova, Maria
Larrain, Borja
Year of Publication: 
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

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