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Valuation effects and risk sharing during the era of financial globalization

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  • Schröder, Marcel

Abstract

This article empirically studies the macroeconomic impact of valuation effects for a sample of 53 countries over 1980–2010. For high-income countries, the paper finds that valuation effects operate as a consumption risk-sharing channel. For emerging market economies (EMEs), the results depend on how valuation effects correlate with domestic consumption growth. Valuation effects act as a risk-sharing channel only if the correlation is negative, and are destabilizing otherwise. Consequently, the degree of risk sharing has improved in the former type of EMEs and worsened in the latter. Differences in the international portfolio composition between the two EME-groups explain this disparate experience.

Suggested Citation

  • Schröder, Marcel, 2019. "Valuation effects and risk sharing during the era of financial globalization," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 467-480.
    • Handle: RePEc:eee:ecofin:v:48:y:2019:i:c:p:467-480
    DOI: 10.1016/j.najef.2019.03.002
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    More about this item

    Keywords

    Valuation effects; Net foreign assets; Risk sharing; Financial globalizationl; Emerging market economies; E21; F32; F36; F62;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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