A Review of International Risk Sharing for Policy Analysis

34 Pages Posted: 23 Oct 2019

See all articles by Pilar Poncela

Pilar Poncela

Universidad Autónoma de Madrid

Michela Nardo

Joint Research Center of the European Commission

Filippo M. Pericoli

European Commission-Joint Research Centre

Date Written: September 30, 2019

Abstract

This paper offers a comprehensive view of international risk sharing and of related policy issues from the perspective of the European Union. The traditional analyses contemplate three risk-sharing channels: the capital markets channel (through cross border portfolio investments), international transfers and the credit markets channel (via savings). Comparative analyses reveal that, on average, about 80% of the shock remains unsmoothed in Europe while only about 18% of the shock is transmitted to consumers within the US. From aggregated figures, there is space for improving, particularly, the cross-border investments channel in Europe. In this sense, the completion of the Banking and Capital Markets Union are expected to boost risk sharing across European member states. We also review new additional issues usually not contemplated by the traditional literature as depreciation, migration and the role of sovereigns and two new additional channels recently considered in the literature: government consumption and the real exchange rate. Finally, we also examine recent analysis related to the geographic distribution of risk sharing.

Keywords: International Risk Sharing, Monetary Union, Policy Analysis, Consumption Smoothing, Cross-border Investments

JEL Classification: F01, F40, F45

Suggested Citation

Poncela, Pilar and Nardo, Michela and Pericoli, Filippo M., A Review of International Risk Sharing for Policy Analysis (September 30, 2019). East Asian Economic Review Vol. 23, No. 3 (September 2019) 227-260, DOI: 10.11644/KIEP.EAER.2019.23.3.362, Available at SSRN: https://ssrn.com/abstract=3473617

Pilar Poncela (Contact Author)

Universidad Autónoma de Madrid ( email )

Campus Cantoblanco
C/Kelsen, 1
Madrid, Madrid 28049
Spain

Michela Nardo

Joint Research Center of the European Commission ( email )

Via E. Fermi 2749
Brussels, B-1049
Belgium

Filippo M. Pericoli

European Commission-Joint Research Centre ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
40
Abstract Views
204
PlumX Metrics