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The Impact of the EMU on Channels of Risk Sharing between Member Countries

In: Proceedings of the Conference on Human and Economic Resources

Author

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  • Faruk Balli

    (Houston University)

  • Bent E. Sørensen

    (Houston University)

Abstract

We estimate the amount of income and consumption smoothing (risk sharing) between countries in the European Monetary Union (EMU) and between other developed countries during the period 1970–2003. In particular, we examine if EMU countries display different patterns of risk sharing than other developed countries in the period leading up to and following the formation of the EMU in 1999. We find that income smoothing from international factor income has increased in the EMU since the introduction of the EMU and that consumption smoothing from procyclical government saving has declined steeply in the EMU since the signing of the Maastricht treaty.

Suggested Citation

  • Faruk Balli & Bent E. Sørensen, 2006. "The Impact of the EMU on Channels of Risk Sharing between Member Countries," Papers of the Annual IUE-SUNY Cortland Conference in Economics, in: Oguz Esen & Ayla Ogus (ed.), Proceedings of the Conference on Human and Economic Resources, pages 399-429, Izmir University of Economics.
    • Handle: RePEc:izm:prcdng:200633
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    File URL: http://eco.ieu.edu.tr/wp-content/proceedings/2006/0633.pdf
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    Cited by:

    1. Faruk Balli & Filippo Maria Pericoli & Eleonora Pierucci, 2016. "Channels of Risk Sharing at Micro Level: Savings, Investments and Risk Aversion Heterogeneity," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 21(1), pages 90-104, January.
    2. Demyanyk, Yuliya & Volosovych, Vadym, 2008. "Gains from financial integration in the European Union: Evidence for new and old members," Journal of International Money and Finance, Elsevier, vol. 27(2), pages 277-294, March.
    3. Faruk Balli & Eleonora Pierucci, 2015. "Globalization and international risk-sharing: do political and social factors matter more than economic integration?," CAMA Working Papers 2015-04, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    4. Kohler, Wilhelm & Müller, Gernot J. & Wellmann, Susanne, 2023. "Risk sharing in currency unions: The migration channel," European Economic Review, Elsevier, vol. 158(C).
    5. Sorensen, Bent E. & Wu, Yi-Tsung & Yosha, Oved & Zhu, Yu, 2007. "Home bias and international risk sharing: Twin puzzles separated at birth," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 587-605, June.
    6. Faruk, Balli & Eleonora, Pierucci, 2016. "Risk sharing among economic sectors," MPRA Paper 72452, University Library of Munich, Germany.
    7. Eleonora Pierucci & Luigi Ventura, 2011. "On international risk sharing and financial globalization: some gloomy evidence," Departmental Working Papers of Economics - University 'Roma Tre' 0124, Department of Economics - University Roma Tre.

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