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Financial-integration thresholds for consumption risk-sharing

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  • Malik, Samreen

Abstract

I present empirical evidence of how international consumption risk sharing varies by levels of financial integration. In a panel data set of 64 countries from 1985–2009, I show a significant presence of threshold effects of financial integration on international consumption risk sharing. The results indicate the presence of two significant thresholds and three corresponding regimes. Below the lower threshold is limited but statistically significant consumption risk-sharing. Above the higher threshold is significant risk-sharing. However, intermediate to the two thresholds is a regime with excess volatility. These findings are therefore suggestive of a U-shaped relationship between financial integration and consumption risk-sharing, with a potentially destabilizing intermediate regime.

Suggested Citation

  • Malik, Samreen, 2015. "Financial-integration thresholds for consumption risk-sharing," International Review of Economics & Finance, Elsevier, vol. 38(C), pages 73-93.
    • Handle: RePEc:eee:reveco:v:38:y:2015:i:c:p:73-93
    DOI: 10.1016/j.iref.2015.01.004
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    More about this item

    Keywords

    Financial integration; Consumption risk-sharing; Threshold effects;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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