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Declining home bias and the increase in international risk sharing: lessons from European integration


Artis, Michael J; Hoffmann, Mathias (2008). Declining home bias and the increase in international risk sharing: lessons from European integration. In: Jonung, Lars; Walkner, Christoph; Watson, Max. Building the financial foundations of the euro: experiences and challenges. London: Routledge / Taylor & Francis, 242-258.

Abstract

This paper provides further evidence on the recent increase in international consumption risk sharing. We show that this increase is more pronounced among EU and EMU countries than among non-E(M)U industrialised countries. We also show that the patterns of international but intra-European risk
sharing have started to diverge from what is found at the level of the OECD as a whole. During the 1990s, capital income flows have started to play a relatively more important role between European countries, whereas the increase in international risk sharing among the OECD as a whole is almost exclusively driven by better consumption smoothing through the accumulation or decumulation of foreign assets. This EMU effect on the pattern of risk sharing survives once we control for differences in international portfolio holdings: while we find that countries with higher equity cross-holdings also tend to share more risk through capital income flows there remains an independent EMU-effect on the way how risk is shared. While it is too early to evaluate these findings conclusively, we discuss some possible interpretations
and their implications for economic policy.

This paper provides further evidence on the recent increase in international consumption risk sharing. We show that this increase is more pronounced among EU and EMU countries than among non-E(M)U industrialised countries. We also show that the patterns of international but intra-European risk
sharing have started to diverge from what is found at the level of the OECD as a whole. During the 1990s, capital income flows have started to play a relatively more important role between European countries, whereas the increase in international risk sharing among the OECD as a whole is almost exclusively driven by better consumption smoothing through the accumulation or decumulation of foreign assets. This EMU effect on the pattern of risk sharing survives once we control for differences in international portfolio holdings: while we find that countries with higher equity cross-holdings also tend to share more risk through capital income flows there remains an independent EMU-effect on the way how risk is shared. While it is too early to evaluate these findings conclusively, we discuss some possible interpretations
and their implications for economic policy.

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Additional indexing

Item Type:Book Section, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:24 June 2008
Deposited On:19 Dec 2008 08:40
Last Modified:14 Sep 2016 13:37
Publisher:Routledge / Taylor & Francis
ISBN:978-92-79-05295-8
Additional Information:This is an electronic version of an article published in Building the financial foundations of the euro. Building the financial foundations of the euro is available online at http://www.routledge.co.uk/books/Building-the-Financial-Foundations-of-the-Euro-isbn9789279052958. Der Artikel ist auch verfügbar als Discussion Paper No. 6617 des Centre for Economic Policy Research (CEPR) unter http://www.cepr.org.
Official URL:http://www.routledge.co.uk/books/Building-the-Financial-Foundations-of-the-Euro-isbn9789279052958
Related URLs:http://www.recherche-portal.ch/primo_library/libweb/action/search.do?fn=search&mode=Advanced&vid=ZAD&vl%28186672378UI0%29=isbn&vl%281UI0%29=contains&vl%28freeText0%29=978-92-79-05295-8
http://www.cepr.org/pubs/dps/DP6617.asp
Permanent URL: https://doi.org/10.5167/uzh-8549

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