American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Trade Costs, Asset Market Frictions, and Risk Sharing
American Economic Review
vol. 102,
no. 6, October 2012
(pp. 2700–2733)
Abstract
I use bilateral import data to test for and quantify the importance of trade costs and asset market frictions in explaining the failure of perfect international consumption risk sharing. I find that while frictions in international asset markets significantly impede optimal consumption risk sharing between developed and developing countries over the period 1970-2000, developed countries are close to optimal risk sharing with each other. Trade costs, in contrast, significantly impede risk sharing for all countries. (JEL E21, E44, F14, F41, G15)Citation
Fitzgerald, Doireann. 2012. "Trade Costs, Asset Market Frictions, and Risk Sharing." American Economic Review, 102 (6): 2700–2733. DOI: 10.1257/aer.102.6.2700Additional Materials
JEL Classification
- E21 Macroeconomics: Consumption; Saving; Wealth
- E44 Financial Markets and the Macroeconomy
- F14 Empirical Studies of Trade
- F41 Open Economy Macroeconomics
- G15 International Financial Markets