Financial Globalization,International Business Cycles and Consumption Risk Sharing*

In spite of two decades of financial globalization, consumption‐based indicators do not seem to signal more international risk sharing. We argue that the fraction of idiosyncratic consumption risk that gets shared among industrialized countries has actually increased considerably over the period 1980–2000 and, in particular, during the 1990s—from around 30 to more than 60 percent. However, standard consumption‐based measures of risk sharing—such as the volatility of consumption conditional on output or international consumption correlations—have been unable to detect this increase because consumption has also been affected by the concurrent decline in the volatility of output growth in most industrialized countries since the 1980s. First, the volatility of output at business‐cycle frequencies has declined by more than has the volatility of permanent fluctuations. Since consumption reacts mainly to permanent shocks, it appears more volatile in relation to current changes in output. This effect seems to have offset the tendency of financial globalization to lower the volatility of consumption conditional on output. Second, because the variability of permanent global shocks has also fallen, international consumption correlations have also generally not increased as financial markets have become more integrated.     

Does financial globalization promote risk sharing?

In theory, one of the main benefits of financial globalization is that it should allow for more efficient international risk sharing. In this paper, we provide an empirical evaluation of the patterns of risk sharing among different groups of countries and examine how international financial integration has affected the evolution of these patterns. Using a variety of empirical techniques, we conclude that there is at best a modest degree of international risk sharing, and certainly nowhere near the levels predicted by theory. In addition, only industrial countries have attained better risk sharing outcomes during the recent period of globalization. Developing countries have, by and large, been shut out of this benefit. Even emerging market economies, many of which have reduced capital controls and all of which have witnessed large increases in cross-border capital flows, have seen little change in their ability to share risk. We find that the composition of flows may help explain why emerging markets have not been able to realize this presumed benefit of financial globalization. In particular, our results suggest that portfolio debt, which had dominated the external liability stocks of most emerging markets until recently, is not conducive to risk sharing.     

Risky Habits: on Risk Sharing,Habit Formation,and the Interpretation of International Consumption Correlations*

Standard international economic models with life cycle/permanent income consumption behavior predict that international portfolio diversification leads to high bilateral consumption correlations. Thus international consumption correlations have been empirically estimated as a test of international portfolio diversification and risk sharing. In this paper we investigate the international consumption correlations generated by a more general model which incorporates habit formation in consumption. We show that, in the presence of a common shock, habit formation itself can generate positive international consumption correlations even in the absence of any international risk sharing. Empirical evidence presented in this paper suggests habit formation characterizes consumption behavior among most of the G‐7 countries. Thus, the extent of international portfolio diversification may be even lower than that suggested by previous research which studied international consumption correlations.     

Banks,Financial Markets and International Consumption Risk Sharing

In this article, we explore how characteristics of the domestic financial system influence the international allocation of consumption risk in a sample of OECD countries. Our results show that the extent of risk sharing achieved does not depend on the overall development of the domestic financial system per se. Rather, it depends on how the financial system is organized. Countries characterized by developed financial markets are less exposed to idiosyncratic risk, whereas the development of the banking sector contributes little to the international diversification of consumption risk.     

Risk sharing through capital gains

Abstract We estimate channels of international risk sharing between European Monetary Union (EMU), European Union, and other OECD countries, 1992–2007. We focus on risk sharing through savings, factor income flows, and capital gains. Risk sharing through factor income and capital gains was close to zero before 1999 but has increased since then. Risk sharing from capital gains, at about 6%, is higher than risk sharing from factor income flows for European Union countries and OECD countries. Risk sharing from factor income flows is higher for euro zone countries, at 14%, reflecting increased international asset and liability holdings in the euro area.     

Securitization of mortgage debt,domestic lending,and international risk sharing

Abstract Securitization makes mortgage‐related risks internationally tradeable and thus contributes considerably to the international diversification of macroeconomic risk: in the years 2003–2008, the increase in international cross‐holdings of securitized mortgage debt has lowered industrialized countries’ conditional consumption volatility (relative to the United States) by about 10–15 percentage points. We turn to the role of domestic credit in explaining this result. Domestic credit leads to better international risk sharing only if debt is securitized and traded internationally. Conversely, the risk‐sharing benefits from securitization seem to evaporate if credit dries up – as it did in the recent financial crisis.     

东亚消费风险分担的度量及潜在福利分析

文章利用1970-2004年的相关数据,度量了东亚13个经济体的消费风险分担的程度以及东亚地区在实现完全风险分担后带来的潜在福利收益.实证结果表明:东亚区域资本市场在平滑GDP冲击方面的作用非常小,对区域借贷市场虽有一定的作用,但较为有限,这说明东亚的消费风险分担程度还相当低;相比OECD国家和欧盟国家,东亚各经济体风险分担的福利收益是比较高的.     

International risk‐sharing in the short run and in the long run

Abstract International risk‐sharing has far‐reaching implications both for economic policy and for basic research in economics. When countries do not share consumption risk, individuals experience consumption fluctuations that are undesirable and possibly unnecessary. We investigate bilateral risk‐sharing at short vs. long horizons. We find substantial cross‐country consumption correlations at trend and business‐cycle frequencies. Correlations are particularly high within Europe. Prior research focused on first‐difference correlations, which are typically quite low. We argue that this reflects measurement error. At all horizons, we find that consumption correlations are not significantly different from output correlations, implying a lack of deliberate consumption risk‐sharing.     

Debt Crises and Risk‐Sharing: The Role of Markets versus Sovereigns

Using a variance decomposition of shocks to gross domestic product (GDP), we quantify the role of international factor income, international transfers, and saving in achieving risk‐sharing during the recent European crisis. We focus on the subperiods 1990–2007, 2008–2009, and 2010 and consider separately the European countries hit by the sovereign debt crisis in 2010. We decompose risk‐sharing from saving into contributions from government and private saving, and show that fiscal austerity programs played an important role in hindering risk‐sharing during the sovereign debt crisis.     

国际资本流动趋势与中国资本循环结构分析

金融全球化是一个动态的发展过程,其程度随着跨国公司的对外资本扩张、机构投资者的投资规模扩大以及各金融主体之间依赖程度的提高而不断加深.在不同发展阶段的国家都不同程度地参与其中,分享金融全球化带来的利益,同时分担由此而产生的风险.文章在对金融全球化与国际资本流动的关系,趋势特征进行概述的基础上,分析了我国国际资本的循环结构并提出建议.     

The Internationalization of the World Economy and its Implication for National Welfare

There is no generally accepted definition of internationalization or globalization. The present paper offers three alternative definitions, in terms of (i) an enlargement of the set of trading countries, (ii) an enlargement of the set of traded commodities, or (iii) the international sharing of technology. It is shown that if each country adopts a Paretian scheme of internal compensation then internationalization in each sense leaves at least one country better off, and that if international compensation is admitted then internationalization in each sense makes every country better off.     

The extensive margin,sectoral shares,and international business cycles

Abstract This paper documents some previously neglected features of sectoral shares at business cycle frequencies in OECD economies. We find that the non‐traded output share is as volatile as aggregate GDP and for most countries is countercyclical. While the standard international real business cycle model has difficulty in accounting for these properties of the data, an extended model that allows for sectoral adjustment along both the intensive and the extensive margins does a much better job of replicating these statistics. The model also matches better the correlation between relative consumption growth and real exchange rate changes, a key measure of international risk‐sharing.     

Securitization,collateral constraints and consumption risk sharing in the euro area

Scarcity of housing collateral is associated with lower credit volumes and hence decreases consumption risk sharing among seven euro area countries in the time period from 1987Q1 to 2007Q4. At the same time, securitization improves risk sharing but does not seem to outweigh the collateral scarcity effect.     

The long run relationship between private consumption and wealth: common and idiosyncratic effects

We investigate the long run relationship between private consumption, disposable income and wealth approximated by equity and house price indices for a panel of 15 industrialized countries. Consumption, income and wealth are cointegrated in their common components. The impact of house prices exceeds the effect arising from equity wealth. The long run vector is broadly in line with the life cycle permanent income hypothesis, if house prices are allowed to enter the relationship. At the idiosyncratic level, a long run equilibrium is detected between consumption and income, i.e. the wealth variable can be excluded. The income elasticity in the idiosyncratic relationship is significantly less than unity. Hence, the presence of wealth effects in consumption equations arises from the international integration of asset markets and points to the relevance of risk sharing activities of agents. Without sufficient opportunities, an increase in national saving rates would be expected, leading to a lower path of private consumption expenditures.     

How strong is the causal relationship between globalization and energy consumption in developed economies? A country-specific time-series and panel analysis

We examine the causal relationship between globalization, economic growth and energy consumption for 25 developed economies using both time series and panel data techniques for the period 1970–2014. Due to the presence of cross-sectional dependence in the panel (countries from Asia, North America, Western Europe and Oceania), we employ the cross-sectional augmented IPS test to ascertain unit root properties. The cointegration test results indicate the presence of a long-run association between globalization, economic growth and energy consumption. Long-run heterogeneous panel elasticities are estimated through the common correlated effects mean group estimator and the augmented mean group estimator. The empirical results reveal that, for most countries, globalization increases energy consumption. In the USA and UK, globalization is negatively correlated with energy consumption. The causality analysis indicates the presence of the globalization-driven energy consumption hypothesis. This empirical analysis suggests insightful policy guidelines for policy makers using globalization as an economic tool to utilize energy efficiently for sustainable economic development in the long run.     

Globalization and Income Gap from the Perspective of Developing Countries

Using political economic theory, this paper analyzes the impact of economic globalization on international income distribution, including the income gap between developed countries and developing ones, the income gap among the developing countries. The paper states that because the economic globalization is the globalization of capitalism manufacture style and developed countries dominates the process, the income gap between developing countries and developed one is difficult to be narrowed, and the income gap in developing countries will enlarge.     

1990-2013年国际人口迁移特征、机制及影响研究

在全球化背景下国际人口迁移呈持续增长态势。利用"2013年全球国际人口迁移趋势"和"2013年经合组织国家国际人口迁移展望"数据,分析1990-2013年国际人口迁移的规模、流向、结构等的变动趋势及区域特征,揭示国际人口迁移的主要动力机制,包括发达国家和发展中国家之间经济社会发展的巨大差距、经济全球化、世界经济政治格局变动、国际移民政策调整和人口规模等,以及国际人口迁移对迁入国和迁出国经济发展、劳动就业、财政收支、人口增长等方面产生的影响。     

基于SWOT的黑龙江省服务外包行业选择的研究

在经济全球化加速发展和全球产业结构调整不断深化的背景下,国际生产分工体系日益完善。国际服务外包已经成为了当今世界上许多国家和地区发展经济,实现产业升级、优化外向型经济结构和提升服务贸易的战略选择。服务外包具有信息技术承载度高、附加值大、资源消耗低、环境污染少、吸纳就业能力强、国际化水平高等特点。在分析了黑龙江省发展服务外包产业的优势、劣势、面临的机遇和挑战的基础上,提出了黑龙江省发展服务外包重点行业选择的方法。     

CO2 emissions in Australia: economic and non-economic drivers in the long-run

Australia has sustained a relatively high economic growth rate since the 1980s compared to other developed countries. Per capita CO₂ emissions tend to be highest amongst OECD countries, creating new challenges to cut back emissions towards international standards. This research explores the long-run dynamics of CO₂ emissions, economic and population growth along with the effects of globalization tested as contributing factors. We find economic growth is not emission-intensive in Australia, while energy consumption is emissions intensive. Second, in an environment of increasing population, our findings suggest Australia needs to be energy efficient at the household level, creating appropriate infrastructure for sustainable population growth. High population growth and open migration policy can be detrimental in reducing CO₂ emissions. Finally, we establish globalized environment has been conducive in combating emissions. In this respect, we establish the beneficial effect of economic globalization compared to social and political dimensions of globalization in curbing emissions.     

Portfolio allocation and international risk sharing

Abstract We show that recent explanations of the consumption‐real exchange rate anomaly that rely on goods and financial market frictions are not robust to introducing just one additional international asset. When portfolios are selected optimally, international trade in two nominal bonds implies a consumption‐real exchange rate correlation that is too high compared with the data even when there are many shocks. Monetary policy specification plays a potentially important role for the degree of risk sharing provided by nominal bonds, both in the benchmark model with only tradable and non‐tradable sector supply shocks and also in the model that allows for news.