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On international risk sharing and financial globalization: some gloomy evidence

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  • Eleonora Pierucci
  • Luigi Ventura

Abstract

By means of panel and time series regression analyses, and by resorting to a variance decomposition due to Asdrubali et al. (1996) we show that income flows to and from abroad did not play, in general, a large risk sharing role for a pool of EU countries over the horizon 1976-2007. This is particularly true in a pre-globalization period, but remains true for some countries, even in the finance globalization era. We then extend the analysis to consider a measure of cash flow, instead of income, available for consumption, and observe that capital flows to and from abroad have played a largely destabilizing role, to an extent that one might have not expected beforehand. Key to this result is also the study of asymmetries in smoothing positive and negative shocks by the different possible channels. These findings seem to provide some useful insights onto the origin of the recent global financial crisis

Suggested Citation

  • 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.
    • Handle: RePEc:rtr:wpaper:0124
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    More about this item

    Keywords

    Risk Sharing; Financial Globalization; Capital Flows;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F15 - International Economics - - Trade - - - Economic Integration

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