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Publication Date
Date Accessioned
Degree PhD
Discipline/Department Economics
Degree Level doctoral
University/Publisher University of Kansas
Abstract International risk sharing is an intertemporal utility maximizing process in which countries of different economic prospects engage in cross-border trade and financial asset transactions to mitigate impacts of idiosyncratic income shocks on consumption. Measuring the extent of international risk sharing (IRS) remains an open empirical question. This dissertation provides a new approach to measuring the extent of IRS for countries and conditions for the measure of consumption correlation to hold and a possible cause to the consumption correlation puzzle.
Subjects/Keywords Economics; Consumption correlation puzzle; Gibbs sampling; International Risk Sharing; Unobserved component model
Contributors Iwata, Shigeru (advisor); Hu, Yaozhong (cmtemember); Wu, Shu (cmtemember); Juhl, Ted P (cmtemember); Keating, John (cmtemember)
Language en
Rights Copyright held by the author.
Country of Publication us
Record ID handle:1808/18661
Repository ku
Date Retrieved
Date Indexed 2018-02-01
Issued Date 2014-12-31 00:00:00

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…would be pooled, and hence domestic per capita consumption growth should not depend on country-specific income shocks. A theoretical definition of perfect international risk sharing can be shown as the equality of marginal utility between any two…

…consumption growth should be theoretically independent from its country-specific income fluctuations if perfect insurance were achieved. 2. A canonical model of international risk sharing 2.1 The model The theoretical correlation result is derived based on…

international risk sharing. In other words, a country’s consumption only reacts to aggregate consumption shock when risk sharing is complete. The literature frequently tests equation (0.7) and (0.10) for full international risk sharing. In…

…of risk sharing measured by pairwise correlations under imperfect risk sharing. Last but not least, international consumption risk sharing is different from domestic consumption smoothing, which could be done simply by saving one's own income or…

…borrowing from relatives. In addition, the setup of the canonical model ignores possible reallocations of income across countries. In this perspective, receiving unilateral foreign aids cannot be considered as international consumption risk sharing (but…

…consumption smoothing) as the aids does not represent contingent claims on the givers' income streams. 3. Current empirical approaches and their limitations There are three main approaches used to measure international risk sharing in the literature…

…theoretical results. The panel regression cit i  yit it allows Asdrubali, Sorensen, and Yosha (1996) to the extent of unshared risks shown by the coefficient  . The country’s degree of international risk sharing could be found by using the…

…approach to measure the extent of risk sharing for a specific country. 4. Conclusions The theory of international risk sharing is based on a simple pooling equilibrium in which countries have the same income prospects, hence, their consumption fluctuations…