Abstract
integration and risk sharing and find that these costs vary a lot over time. Finally, we show that consumption risk sharing is higher during times of crises, i.e. at times when marginal utility is high and risk sharing is most valuable.
| Original language | English |
|---|---|
| Publication date | 30 Jun 2014 |
| Number of pages | 49 |
| Publication status | Published - 30 Jun 2014 |
| Event | The 41th European Finance Association Annual Meeting (EFA 2014) - Palazzo dei Congressi, Lugano, Switzerland Duration: 27 Aug 2014 → 30 Aug 2014 Conference number: 41 http://www.efa2014.org/ |
Conference
| Conference | The 41th European Finance Association Annual Meeting (EFA 2014) |
|---|---|
| Number | 41 |
| Location | Palazzo dei Congressi |
| Country | Switzerland |
| City | Lugano |
| Period | 27/08/2014 → 30/08/2014 |
| Internet address |
Cite this
}
Capital Market Integration and Consumption Risk Sharing over the Long Run. / Rangvid, Jesper; Santa-Clara, Pedro; Schmeling, Maik.
2014. Paper presented at The 41th European Finance Association Annual Meeting (EFA 2014), Lugano, Switzerland.Research output: Contribution to conference › Paper › Research › peer-review
TY - CONF
T1 - Capital Market Integration and Consumption Risk Sharing over the Long Run
AU - Rangvid, Jesper
AU - Santa-Clara, Pedro
AU - Schmeling, Maik
PY - 2014/6/30
Y1 - 2014/6/30
N2 - We empirically investigate time variation in capital market integration and consumption risk sharing using data for 16 countries from 1875 to 2012. We show that there has been considerable variation over time in the degrees of capital market integration and consumption risk sharing and that higher capital market integration forecasts more consumption risk sharing in the future. This finding is robust is to controlling for trade openness and exchange rate volatilities. Hence, financial integration seems to drive consumption risk sharing whereas we find no evidence that risk sharing forecasts market integration. We also calculate the welfare costs of imperfect capital marketintegration and risk sharing and find that these costs vary a lot over time. Finally, we show that consumption risk sharing is higher during times of crises, i.e. at times when marginal utility is high and risk sharing is most valuable.
AB - We empirically investigate time variation in capital market integration and consumption risk sharing using data for 16 countries from 1875 to 2012. We show that there has been considerable variation over time in the degrees of capital market integration and consumption risk sharing and that higher capital market integration forecasts more consumption risk sharing in the future. This finding is robust is to controlling for trade openness and exchange rate volatilities. Hence, financial integration seems to drive consumption risk sharing whereas we find no evidence that risk sharing forecasts market integration. We also calculate the welfare costs of imperfect capital marketintegration and risk sharing and find that these costs vary a lot over time. Finally, we show that consumption risk sharing is higher during times of crises, i.e. at times when marginal utility is high and risk sharing is most valuable.
KW - Market integration
KW - Consumption risk sharing
M3 - Paper
ER -