On international risk sharing and financial globalization: some gloomy evidence

Eleonora Pierucci () and Luigi Ventura

No 124, Departmental Working Papers of Economics - University 'Roma Tre' from Department of Economics - University Roma Tre

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

Keywords: Risk Sharing; Financial Globalization; Capital Flows (search for similar items in EconPapers)
JEL-codes: E2 E6 F15 (search for similar items in EconPapers)
Date: 2011-01
New Economics Papers: this item is included in nep-ias and nep-mac
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