Debt Crises and Risk‐Sharing: The Role of Markets versus Sovereigns |
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Authors: | Sebnem Kalemli‐Ozcan Emiliano Luttini Bent Sørensen |
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Institution: | 1. University of Maryland, College Park, , MD, 20742 USA;2. University of Houston, , Houston, TX, 77004 USA |
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Abstract: | 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. |
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Keywords: | Capital markets income insurance international financial integration E2 E6 F15 |
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