Abstract

Adopting an asset-market view of international risk sharing, we identify various sources of macroeconomic risk faced by international investors using a structural Vector Autoregression model. We find that most of the risks of exogenous financial market shocks are shared by international investors through the existing asset markets. However, other macroeconomic risks such as those associated with exogenous shocks to consumption growth, inflation and monetary policies are not fully shared across countries. This finding helps us understand the apparently contradicting perceptions of international risk sharing generated by the analysis of asset-market returns versus that of aggregate consumption growth across countries.

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Additional Information

ISSN
1538-4616
Print ISSN
0022-2879
Pages
pp. 1121-1141
Launched on MUSE
2006-01-26
Open Access
No
Archive Status
Archived 2007
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