Risk sharing channels in OECD countries: A heterogeneous panel VAR approach
We aim to improve upon the existing empirical literature on international risk sharing channels under three dimensions. First, we generalize dynamic multi-equation approaches, by adopting a Heterogeneous Panel VAR model where the coefficients are allowed to vary across countries. Second, we introduc...
| Autores: | , , , |
|---|---|
| Tipo de recurso: | artículo |
| Fecha de publicación: | 2023 |
| País: | España |
| Institución: | Universidad Autónoma de Madrid |
| Repositorio: | Biblos-e Archivo. Repositorio Institucional de la UAM |
| Idioma: | inglés |
| OAI Identifier: | oai:repositorio.uam.es:10486/718423 |
| Acceso en línea: | http://hdl.handle.net/10486/718423 https://dx.doi.org/10.1016/j.jimonfin.2023.102804 |
| Access Level: | acceso abierto |
| Palabra clave: | Consumption smoothing Exchange rates Government consumption Risk sharing Economía |
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Risk sharing channels in OECD countries: A heterogeneous panel VAR approachAsdrubali, PierfedericoKim, SoyoungPericoli, Filippo MariaPoncela Blanco, María del PilarConsumption smoothingExchange ratesGovernment consumptionRisk sharingEconomíaWe aim to improve upon the existing empirical literature on international risk sharing channels under three dimensions. First, we generalize dynamic multi-equation approaches, by adopting a Heterogeneous Panel VAR model where the coefficients are allowed to vary across countries. Second, we introduce two new risk sharing channels – government consumption and the real exchange rate – to investigate the role of fiscal policy and international price adjustments. Third, we establish a better link between the ”channels” empirical model and a theoretical formulation of the risk sharing condition, which allows for PPP violations. Our empirical analysis, for 21 OECD countries over 1960–2018, confirms the strong smoothing role played by credit markets and the small degree of risk sharing achieved through factor incomes. Interestingly, government consumption tends to have a dis-smoothing effect, due to its counter-cyclicality. The real exchange rate is driven by the dis-smoothing role played by the nominal exchange rate, only partially offset by relative price adjustments. The evolution of these mechanisms is diverse, but we document the role played by the deterioration of credit market smoothing for the long-run decline in risk sharing started at the beginning of the century. However, the annihilation of total risk sharing at the start of the century reflects mostly the nominal exchange rate effect. Our results are strikingly different across countries, especially if we take into account the (dis-) smoothing effects occurring through the real exchange rate. Even considering only traditional risk sharing channels, the country-specific magnitude of risk sharing on impact ranges from around 10% to over 50%. In addition, dynamics are also quite diverse across countriesThis paper was started when Pilar Poncela was at the European Commission, Joint Research Centre at Ispra (Italy) and finished when she returned to Universidad Autónoma de Madrid (Spain). She acknowledges partial financial support from the Spanish Government Project PID2019-108079GB-C22/AEI/ 10.13039/501100011033 (MINECO/FEDER)Elsevier20232023-03-01research articlehttp://purl.org/coar/resource_type/c_2df8fbb1VoRhttp://purl.org/coar/version/c_970fb48d4fbd8a85info:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10486/718423https://dx.doi.org/10.1016/j.jimonfin.2023.102804reponame:Biblos-e Archivo. Repositorio Institucional de la UAMinstname:Universidad Autónoma de MadridInglésengopen accesshttp://purl.org/coar/access_right/c_abf2Attribution 4.0 Internationalhttp://creativecommons.org/licenses/by/4.0/info:eu-repo/semantics/openAccessoai:repositorio.uam.es:10486/7184232026-06-23T12:46:27Z |
| dc.title.none.fl_str_mv |
Risk sharing channels in OECD countries: A heterogeneous panel VAR approach |
| title |
Risk sharing channels in OECD countries: A heterogeneous panel VAR approach |
| spellingShingle |
Risk sharing channels in OECD countries: A heterogeneous panel VAR approach Asdrubali, Pierfederico Consumption smoothing Exchange rates Government consumption Risk sharing Economía |
| title_short |
Risk sharing channels in OECD countries: A heterogeneous panel VAR approach |
| title_full |
Risk sharing channels in OECD countries: A heterogeneous panel VAR approach |
| title_fullStr |
Risk sharing channels in OECD countries: A heterogeneous panel VAR approach |
| title_full_unstemmed |
Risk sharing channels in OECD countries: A heterogeneous panel VAR approach |
| title_sort |
Risk sharing channels in OECD countries: A heterogeneous panel VAR approach |
| dc.creator.none.fl_str_mv |
Asdrubali, Pierfederico Kim, Soyoung Pericoli, Filippo Maria Poncela Blanco, María del Pilar |
| author |
Asdrubali, Pierfederico |
| author_facet |
Asdrubali, Pierfederico Kim, Soyoung Pericoli, Filippo Maria Poncela Blanco, María del Pilar |
| author_role |
author |
| author2 |
Kim, Soyoung Pericoli, Filippo Maria Poncela Blanco, María del Pilar |
| author2_role |
author author author |
| dc.subject.none.fl_str_mv |
Consumption smoothing Exchange rates Government consumption Risk sharing Economía |
| topic |
Consumption smoothing Exchange rates Government consumption Risk sharing Economía |
| description |
We aim to improve upon the existing empirical literature on international risk sharing channels under three dimensions. First, we generalize dynamic multi-equation approaches, by adopting a Heterogeneous Panel VAR model where the coefficients are allowed to vary across countries. Second, we introduce two new risk sharing channels – government consumption and the real exchange rate – to investigate the role of fiscal policy and international price adjustments. Third, we establish a better link between the ”channels” empirical model and a theoretical formulation of the risk sharing condition, which allows for PPP violations. Our empirical analysis, for 21 OECD countries over 1960–2018, confirms the strong smoothing role played by credit markets and the small degree of risk sharing achieved through factor incomes. Interestingly, government consumption tends to have a dis-smoothing effect, due to its counter-cyclicality. The real exchange rate is driven by the dis-smoothing role played by the nominal exchange rate, only partially offset by relative price adjustments. The evolution of these mechanisms is diverse, but we document the role played by the deterioration of credit market smoothing for the long-run decline in risk sharing started at the beginning of the century. However, the annihilation of total risk sharing at the start of the century reflects mostly the nominal exchange rate effect. Our results are strikingly different across countries, especially if we take into account the (dis-) smoothing effects occurring through the real exchange rate. Even considering only traditional risk sharing channels, the country-specific magnitude of risk sharing on impact ranges from around 10% to over 50%. In addition, dynamics are also quite diverse across countries |
| publishDate |
2023 |
| dc.date.none.fl_str_mv |
2023 2023-03-01 |
| dc.type.none.fl_str_mv |
research article http://purl.org/coar/resource_type/c_2df8fbb1 VoR http://purl.org/coar/version/c_970fb48d4fbd8a85 |
| dc.type.openaire.fl_str_mv |
info:eu-repo/semantics/article |
| format |
article |
| dc.identifier.none.fl_str_mv |
http://hdl.handle.net/10486/718423 https://dx.doi.org/10.1016/j.jimonfin.2023.102804 |
| url |
http://hdl.handle.net/10486/718423 https://dx.doi.org/10.1016/j.jimonfin.2023.102804 |
| dc.language.none.fl_str_mv |
Inglés eng |
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Inglés |
| language |
eng |
| dc.rights.none.fl_str_mv |
open access http://purl.org/coar/access_right/c_abf2 Attribution 4.0 International http://creativecommons.org/licenses/by/4.0/ |
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info:eu-repo/semantics/openAccess |
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open access http://purl.org/coar/access_right/c_abf2 Attribution 4.0 International http://creativecommons.org/licenses/by/4.0/ |
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openAccess |
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application/pdf |
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Elsevier |
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Elsevier |
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reponame:Biblos-e Archivo. Repositorio Institucional de la UAM instname:Universidad Autónoma de Madrid |
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Universidad Autónoma de Madrid |
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Biblos-e Archivo. Repositorio Institucional de la UAM |
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Biblos-e Archivo. Repositorio Institucional de la UAM |
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