Globalisation and Consumption Risk-Sharing in Emerging Market Economies

14 Pages Posted: 13 Feb 2019

Date Written: December 21, 2018

Abstract

Our aim is to explore how globalisation has affected consumption risk-sharing in emerging market economies. To that end, we implement a consumption risk-sharing test, using the Barro-Ursua Macroeconomic data set. Its span lets us explore historic episodes in which globalisation has markedly changed. We account for risk aversion heterogeneity by using the economies’ estimates of their relative risk aversion coefficients, and for subjective discount factor heterogeneity by estimating panel regressions with fixed effects. Specifically, we explore risk-sharing in emerging market and advanced economies as two groups, and by geographic regions. In most cases, we reject full insurance. However, advanced economies seem to have achieved full insurance in more recent periods. At a regional level, Europe and Asia appear to have attained such a result as well.

Full Publication: Globalisation and Deglobalisation

Keywords: Risk-sharing, consumption risk-sharing, globalisation

JEL Classification: E21, F6

Suggested Citation

Ramos-Francia, Manuel and García-Verdú, Santiago, Globalisation and Consumption Risk-Sharing in Emerging Market Economies (December 21, 2018). BIS Paper No. 100o, Available at SSRN: https://ssrn.com/abstract=3332073

Santiago García-Verdú

Banco de México

Av. 5 de Mayo No. 6
Col. Centro, Deleg. Cuauhtémoc
Ciudad de México, DF, 06059
Mexico

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