Author: Michael J. ArtisPublisher:
ISBN:
Category :
Languages : en
Pages : 36
Book Description
Financial Globalization, International Business Cycles, and Consumption Risk Sharing
Author: Michael J. ArtisFinancial Globalization, International Business Cycles and Consumption Risk Sharing
Author: Stefan GerlachInternational Risk Sharing During the Globalization Era
Author: Mr.Akito MatsumotoPublisher: International Monetary Fund
ISBN: 1451873565
Category : Business & Economics
Languages : en
Pages : 40
Book Description
Though theory suggests financial globalization should improve international risk sharing, empirical support has been limited. We develop a simple welfare-based measure that captures how far countries are from the ideal of perfect risk sharing. We then take it to data and find international risk sharing has, indeed, improved during globalization. Improved risk sharing comes mostly from the convergence in rates of consumption growth among countries rather than from synchronization of consumption at the business cycle frequency. Our finding explains why many existing measures fail to detect improved risk sharing-they focus only on risk sharing at the business cycle frequency.
How Does Financial Globalization Affect Risk Sharing? Patterns and Channels
Author: M. Ayhan KosePublisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 48
Book Description
In theory, one of the main benefits of financial globalization is that it should allow for more efficient international risk sharing. This paper provides a comprehensive empirical evaluation of the patterns of risk sharing among different groups of countries and examines how international financial integration has affected the evolution of these patterns. Using a variety of empirical techniques, we conclude that there is at best a modest degree of international risk sharing, and certainly nowhere near the levels predicted by theory. In addition, only industrial countries have attained better risk sharing outcomes during the recent period of globalization. Developing countries have, by and large, been shut out of this benefit. The most interesting result is that even emerging market economies, which have experienced large increases in cross-border capital flows, have seen little change in their ability to share risk. We find that the composition of flows may help explain why emerging markets have not been able to realize this presumed benefit of financial globalization. In particular, our results suggest that portfolio debt, which has dominated the external liability stocks of most emerging markets until recently, is not conducive to risk sharing.
How Does Globalization Affect the Synchronization of Business Cycles?
Author: Mr.Ayhan KosePublisher: International Monetary Fund
ISBN: 1451844549
Category : Business & Economics
Languages : en
Pages : 15
Book Description
This paper examines the impact of rising trade and financial integration on international business cycle comovement among a large group of industrial and developing countries. The results provide at best limited support for the conventional wisdom that globalization has increased the degree of synchronization of business cycles. The evidence that trade and financial integration enhance global spillovers of macroeconomic fluctuations is stronger for industrial countries. One striking result is that, on average, cross-country consumption correlations have not increased in the 1990s, precisely when financial integration would have been expected to result in better risk-sharing opportunities, especially for developing countries.
Effects of Financial Globalization on Developing Countries
Author: Mr.Ayhan KosePublisher: International Monetary Fund
ISBN: 9781589062214
Category : Business & Economics
Languages : en
Pages : 68
Book Description
This study provides a candid, systematic, and critical review of recent evidence on this complex subject. Based on a review of the literature and some new empirical evidence, it finds that (1) in spite of an apparently strong theoretical presumption, it is difficult to detect a strong and robust causal relationship between financial integration and economic growth; (2) contrary to theoretical predictions, financial integration appears to be associated with increases in consumption volatility (both in absolute terms and relative to income volatility) in many developing countries; and (3) there appear to be threshold effects in both of these relationships, which may be related to absorptive capacity. Some recent evidence suggests that sound macroeconomic frameworks and, in particular, good governance are both quantitatively and qualitatively important in affecting developing countries’ experiences with financial globalization.
The Home Bias and Capital Income Flows Between Countries and Regions
Author: Michael J. ArtisPublisher:
ISBN:
Category :
Languages : en
Pages : 29
Book Description
This paper documents a marked increase in international consumption risk sharing throughout the recent globalization period. Unlike earlier studies that have found it difficult to document a consistent effect of financial globalization on international consumption comovements, we make use of the information implicit in the relative levels of consumption and output to measure long-run risk sharing among OECD countries and US federal states.We derive our empirical setup from a deliberately simplistic model in which countries can trade perpetual claims to each other's output (Shiller securities). Our framework allows us to distinguish between two channels of risk sharing: ex ante diversification that leads to income smoothing through capital income flows and ex-post consumption smoothing through savings and dissavings. The model successfully replicates the patterns of income and consumption smoothing observed in both U.S. state-level and international data. The increase in international consumption risk sharing is closely associated with the decline in international portfolio home bias. While capital income flows remain relatively limited as a channel of risk sharing at business cycle frequencies, we find that better international portfolio diversification has led to a considerable increase in capital income flows at medium and long horizons.
Financial Globalization and Real Regionalization
Author: Jonathan HeathcotePublisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 72
Book Description
Over the period 1972-1986, the correlations of GDP, employment and investment between the United States and an aggregate of Europe, Canada and Japan were respectively 0.76, 0.66, and 0.63. For the period 1986 to 2000 the same correlations were much lower: 0.26, 0.03 and -0.07 (real regionalization). At the same time, U.S. international asset trade has significantly increased. For example, between 1972 and 1999, United States gross FDI and equity assets in the same group of countries rose from 4 to 23 percent of the U.S. capital stock (financial globalization). We document that the correlation of real shocks between the U.S. and the rest of the world has declined. We then present a model in which international financial market integration occurs endogenously in response to less correlated shocks. Financial integration further reduces the international correlations in GDP and factor supplies. We find that both less correlated shocks and endogenous financial market development are needed to account for all the changes in the international business cycle.
International Risk Sharing During the Globalization Era - Le Partage International Du Risque Dans Une Ère De Mondialisation
Author: Robert P. FloodPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
Though financial globalization should improve international risk sharing, empirical support is lacking. We develop a simple welfare-based measure that captures how far countries are from the ideal of perfect risk sharing. Applying it to data, we find some evidence that international risk sharing has improved during globalization. Improved risk sharing comes mostly from the convergence in rates of consumption growth among countries rather than from synchronization of consumption at the business cycle frequency. Même si la mondialisation devrait améliorer le partage international du risque, on n'en a pas de confirmation empirique. Les auteurs développent une mesure simple fondée sur le niveau de bien-être pour déterminer à quelle distance les divers pays se trouvent de l'idéal du parfait partage du risque. Grâce à cette mesure, on trouve que le partage international du risque s'est amélioré avec la mondialisation. Cette amélioration vient surtout de la convergence des taux de croissance de la consommation des divers pays plutôt que de la synchronisation de la consommation à la fréquence du cycle d'affaires.
How Does Globalization Affect the Synchronization of Business Cycles?
Author: M. Ayhan KosePublisher:
ISBN:
Category :
Languages : en
Pages : 14
Book Description
This paper examines the impact of rising trade and financial integration on international business cycle comovement among a large group of industrial and developing countries. The results provide at best limited support for the conventional wisdom that globalization has increased the degree of synchronization of business cycles. The evidence that trade and financial integration enhance global spillovers of macroeconomic fluctuations is stronger for industrial countries. One striking result is that, on average, cross-country consumption correlations have not increased in the 1990s, precisely when financial integration would have been expected to result in better risk-sharing opportunities, especially for developing countries.