Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/26073
Authors: 
Fidrmuc, Jarko
Foster, Neil
Scharler, Johann
Year of Publication: 
2007
Series/Report no.: 
CESifo working paper 2028
Abstract: 
Economic theory predicts that consumption growth rates should be highly correlated across countries. Empirical evidence overwhelmingly rejects this prediction. We examine whether increased financial integration and labour market rigidities can help explain this apparent contradiction between theory and empirics. Using data for OECD countries we show that although financial integration has a limited impact upon cross-country consumption correlations, labour market rigidities significantly increase consumption correlations. The results suggest that labour market rigidities improve the allocation of consumption risks either by shifting risk from employees to firms and shareholders or because it makes future income streams easier to use as collateral.
JEL: 
E32
F15
E21
Document Type: 
Working Paper

Files in This Item:
File
Size
248.66 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.