Debt Crises and Risk Sharing: The Role of Markets Versus Sovereigns
30 Pages Posted: 9 Jul 2013
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Debt Crises and Risk Sharing: The Role of Markets Versus Sovereigns
Date Written: July 2013
Abstract
Using a variance decomposition of shocks to GDP, we quantify the role of international factor income, international transfers, and saving in achieving risk sharing during the recent European crisis. We focus on the sub-periods 1990--2007, 2008--2009, and 2010 and consider separately the European countries hit by the sovereign debt crisis in 2010. We decompose risk sharing from saving into contributions from government and private saving and show that fiscal austerity programs played an important role in hindering risk sharing during the sovereign debt crisis.
Keywords: Capital Markets, Income Insurance, International Financial Integration
JEL Classification: E2, E6, F15, G15
Suggested Citation: Suggested Citation
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