A Provincial View of Consumption Risk Sharing: Asset Classes As Shock Absorbers

40 Pages Posted: 12 Mar 2019

See all articles by Victor Pontines

Victor Pontines

South East Asian Central Banks (SEACEN) Research and Training Centre

Date Written: March 12, 2019

Abstract

Using a unique data set on provincial net factor income flows disaggregated across the three asset classes of debt, equity and FDI reinvested earnings in Korea, we investigated how these asset channels impacted consumption risk sharing during the Global Financial Crisis and the European sovereign debt crisis. Adopting spatial panel methods, this study found that net receipts of debt, equity and FDI retained earnings have all contributed favorably to consumption risk sharing during these crises episodes, with FDI retained earnings robustly positive in its contribution in buffering shocks to consumption. We also found suggestive evidence that net equity receipts rather than net debt receipts contributed more to risk sharing during these episodes. Overall, our results indicate that different asset channels can provide the insurance needed to cushion the economy against adverse shocks.

Keywords: Consumption risk sharing, Consumption smoothing, Factor income flows, Spatial panel

JEL Classification: E25, F36, G11, R12

Suggested Citation

Pontines, Victor, A Provincial View of Consumption Risk Sharing: Asset Classes As Shock Absorbers (March 12, 2019). CAMA Working Paper No. 23/2019. Available at SSRN: https://ssrn.com/abstract=3350782 or http://dx.doi.org/10.2139/ssrn.3350782

Victor Pontines (Contact Author)

South East Asian Central Banks (SEACEN) Research and Training Centre ( email )

Level 5, Sasana Kijang, Bank Negara Malaysia
2 Jalan Dato’ Onn
Kuala Lumpur, 50480
Malaysia

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