Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/210902
Authors: 
Gardberg, Malin
Year of Publication: 
2019
Series/Report no.: 
IFN Working Paper No. 1261
Abstract: 
Complete financial markets allow countries to share their consumption risks internationally, thereby creating welfare gains through lower volatility of aggregate consumption. This paper empirically looks at international consumption risk sharing and its determinants in a panel of 120 countries from 1970 to 2014. Contrary to some previous studies, I show that financial liberalization and financial integration has a significantly positive impact on international consumption risk sharing in poorer developing countries, whereas in emerging market countries only capital account openness has an impact. Moreover, there is some evidence that high income inequality or a high share of low income individuals reduces consumption smoothing in less developed countries. Lack of financial reforms, a lower degree of financial integration and higher inequality can thus partly explain why the degree of risk sharing is lower in developing countries than in advanced economies.
Subjects: 
International consumption risk sharing
Financial liberalization
Financial integration
Inequality
Panel data
JEL: 
C23
E02
E21
E44
F38
F62
G15
Document Type: 
Working Paper

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