Debt Crises and Risk Sharing: The Role of Markets Versus Sovereigns

30 Pages Posted: 9 Jul 2013

See all articles by Sebnem Kalemli-Ozcan

Sebnem Kalemli-Ozcan

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Koc University, Graduate School of Business

Emiliano E. Luttini

University of Houston

Bent E. Sørensen

University of Houston - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

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

Kalemli-Ozcan, Sebnem and Luttini, Emiliano E. and Sorensen, Bent E., Debt Crises and Risk Sharing: The Role of Markets Versus Sovereigns (July 2013). CEPR Discussion Paper No. DP9541, Available at SSRN: https://ssrn.com/abstract=2291362

Sebnem Kalemli-Ozcan (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Koc University, Graduate School of Business ( email )

Rumelifeneri Yolu
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Istanbul, 34450
Turkey

Emiliano E. Luttini

University of Houston ( email )

Bent E. Sorensen

University of Houston - Department of Economics ( email )

204 McElhinney Hall
Houston, TX 77204-5882
United States
713-743-3841 (Phone)
713-743-3798 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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