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Author : Joong Shik Kang
Publisher :
ISBN 13 :
Total Pages : 150 pages
Book Rating : 4.:/5 (891 download)
Download or read book International Risk Sharing and Incomplete Asset Market written by Joong Shik Kang and published by . This book was released on 2007 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Sven Blank
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (93 download)
Download or read book Research Note on "international Consumption Risk Sharing with Incomplete Goods and Asset Markets" written by Sven Blank and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Perfect risk sharing requires both, frictionless goods as well as frictionless asset markets. To analyze the consequences of both type of frictions for consumption risk sharing across countries, the model by Ghironi and Melitz (2005) is extended to allow for international trade in equities. The model features fixed costs of exporting as well as variables iceberg costs when shipping goods. Financial markets are incomplete, as only two assets are traded, which cannot span all the uncertainty caused by potential shock scenarios. In models with incomplete asset markets, two well known problems arise. First, the steady state portfolio allocation in a non-stochastic steady state is indeterminate since assets are perfect substitutes. And, second, as noted by Schmitt-Grohé and Uribe (2003) among others, even transitory shocks may have permanent effects on wealth. This, in turn, may lead to non-stationary responses of the endogenous variables. To deal with these issues, quadratic portfolio costs on asset holdings as in Ghironi, Lee, and Rebucci (2007) are introduced. Besides introducing frictions in asset markets, these costs help to pin down the steady state portfolio allocation and induce model stationarity. This research note gives technical details on the solution of the model. In the following section, the basic setup of the model as well as the main variables and equilibrium conditions of the model are briefly summarized. Section 3 solves for the steady state levels of the endogenous variables.
Author : Sven Blank
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (118 download)
Download or read book International Consumption Risk Sharing with Incomplete Goods and Asset Markets written by Sven Blank and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Michael W. Brandt
Publisher :
ISBN 13 :
Total Pages : 52 pages
Book Rating : 4.:/5 (318 download)
Download or read book International Risk Sharing is Better Than You Think (or Exchange Rates are Much Too Smooth) written by Michael W. Brandt and published by . This book was released on 2001 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: Exchange rates depreciate by the difference between the domestic and foreign marginal utility growths. Exchange rates vary a lot , as much as 10% per year. However, equity premia imply that marginal utility growths vary much more, by at least 50% per year. This means that marginal utility growths must be highly correlated across countries -- international risk sharing is better than you think. Conversely, if risks really are not shared internationally, exchange rates should vary more than they do -- exchange rates are much too smooth. We calculate an index of international risk sharing that formalizes this intuition in the context of both complete and incomplete capital markets. Our results suggest that risk sharing is indeed very high across several pairs of countries.
Author : Enrique Martínez-García
Publisher :
ISBN 13 :
Total Pages : 21 pages
Book Rating : 4.:/5 (13 download)
Download or read book A Quantitative Assessment of the Role of Incomplete Asset Markets on the Dynamics of the Real Exchange Rate written by Enrique Martínez-García and published by . This book was released on 2016 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: I develop a two-country New Keynesian model with capital accumulation and incomplete international asset markets that provides novel insights on the effect that imperfect international risk-sharing has on international business cycles and RER dynamics. I find that business cycles appear similar whether international asset markets are complete or not when driven by a combination of non-persistent monetary shocks and persistent productivity (TFP) shocks. In turn, international asset market incompleteness has sizeable effects if (persistent) investment-specific technology (IST) shocks are a main driver of business cycles. I also show that the model with incomplete international asset markets can approximate the RER volatility and persistence observed in the data, for instance, if IST shocks are near-unit-root. Hence, I conclude that the nature of shocks, the extent of financial integration across countries and the existing limitations on asset trading are central to understand the dynamics of the real exchange rate and the endogenous international transmission over the business cycles.
Author : Devereux, Michael
Publisher :
ISBN 13 :
Total Pages : 26 pages
Book Rating : 4.:/5 (358 download)
Download or read book Growth, Convergence, and Risk-sharing with Incomplete International Asset Markets written by Devereux, Michael and published by . This book was released on 1994 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Viktoria V. Hnatkovska
Publisher :
ISBN 13 :
Total Pages : 374 pages
Book Rating : 4.:/5 (713 download)
Download or read book International Risk Sharing and Portfolio Choice with Incomplete Asset Markets written by Viktoria V. Hnatkovska and published by . This book was released on 2006 with total page 374 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Craig Burnside
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (822 download)
Download or read book Exchange rate determination, risk sharing and the asset market view written by Craig Burnside and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent research in international finance has equated changes in real exchange rates with differences between the marginal utility growths of representative agents in different economies. The asset market view of exchange rates, encapsulated in this equation, has been used to gain insights into exchange rate determination, foreign exchange risk premia, and international risk sharing. We argue that, in fact, this equation is of limited usefulness. By itself, the asset market view does not identify the economic mechanism that determines the exchange rate. It only holds under complete markets, and even then, it does not generally allow us to identify the marginal utility growths of distinct agents. Moreover, if we allow for incomplete asset markets, measures of agents' marginal utility growths, and international risk sharing, cannot be based on asset market and exchange rate data alone. Instead, we argue that in order to explain how exchange rates are determined, it is necessary to make specific assumptions about preferences, goods market frictions, the assets agents can trade, and the nature of endowments or production.
Author : John Heaton
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (133 download)
Download or read book Evaluation the Effects of Incomplete Markets on Risk Sharing and Asset Pricing written by John Heaton and published by . This book was released on 1993 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Michael B. Devereux
Publisher :
ISBN 13 :
Total Pages : 26 pages
Book Rating : 4.:/5 (933 download)
Download or read book Growth Convergence and Risk-sharing with Incomplete International Asset Markets written by Michael B. Devereux and published by . This book was released on 1994 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : John Heaton
Publisher :
ISBN 13 :
Total Pages : 45 pages
Book Rating : 4.:/5 (276 download)
Download or read book Evaluating the Effects of Incomplete Markets on Risk Sharing Nad Asset Pricing written by John Heaton and published by . This book was released on 1992 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Mr.Akito Matsumoto
Publisher : International Monetary Fund
ISBN 13 : 1451873565
Total Pages : 40 pages
Book Rating : 4.4/5 (518 download)
Download or read book International Risk Sharing During the Globalization Era written by Mr.Akito Matsumoto and published by International Monetary Fund. This book was released on 2009-09-01 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Though theory suggests financial globalization should improve international risk sharing, empirical support has been limited. We develop a simple welfare-based measure that captures how far countries are from the ideal of perfect risk sharing. We then take it to data and find international risk sharing has, indeed, improved during globalization. Improved risk sharing comes mostly from the convergence in rates of consumption growth among countries rather than from synchronization of consumption at the business cycle frequency. Our finding explains why many existing measures fail to detect improved risk sharing-they focus only on risk sharing at the business cycle frequency.
Author : Sven Blank
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (93 download)
Download or read book Research Note on "International Consumption Risk Sharing and Monetary Policy" written by Sven Blank and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This model analyzes the impact of monetary policy on international consumption risk sharing. To this end, the setup by Ghironi and Stebunovs (2008) is extended in two dimensions. First, to allow for international portfolio choices, cross-border trade of home and foreign equity is brought in. Second, to assign a non-trivial role to monetary policy, nominal price rigidities are introduced as in Bilbiie, Ghironi, and Melitz (2007). The model features incomplete goods as well as incomplete asset markets. Frictions in goods markets are given by variable iceberg-type costs when shipping goods. Financial markets are incomplete as the set of available assets cannot span all the uncertainty induced by potential shock scenarios. In addition, financial markets are not fully integrated as engagement in asset markets is costly. This research note gives technical details on the solution of the model. In the following section, the basic setup of the model as well as the main variables and equilibrium conditions of the model are briefly summarized. Section 3 presents the steady state.
Author : Piero Gottardi
Publisher :
ISBN 13 :
Total Pages : 18 pages
Book Rating : 4.:/5 (851 download)
Download or read book Risk-sharing and Retrading in Incomplete Markets written by Piero Gottardi and published by . This book was released on 2012 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: At a competitive equilibrium of an incomplete-markets economy agents' marginal valuations for the tradable assets are equalized ex-ante. We characterize the finest partition of the state space conditional on which this equality holds for any economy. This leads naturally to a necessary and sufficient condition on information that would lead to retrade, if such information were to become publicly available after the initial round of trade.
Author : Hande Kucuk Tuger
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (776 download)
Download or read book Essays on International Portfolio Allocation and Risk Sharing written by Hande Kucuk Tuger and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis contributes to the theoretical literature that analyses the link between international asset trade and international risk sharing. Despite the massive increase in cross-border asset trade since the 1990's, consumption risk sharing across countries remains limited. In standard international business cycle models, efficient risk sharing requires that consumption should be higher in the country where it is cheaper to consume, implying a high positive correlation between relative consumption and real exchange rate, which is strongly rejected in the data. Recent contributions show that it is possible to account for this so-called 'consumption-real exchange rate anomaly' in models with goods and financial market frictions where international asset trade is restricted to a single non-contingent bond. Chapter 1 analyses whether this class of models can account for the anomaly under a richer asset market structure where agents can trade in domestic and foreign currency bonds. Even such a small departure from the single bond economy implies too much risk sharing compared to the data although the number of assets that can be traded is less than the number of shocks affecting each economy. Introducing demand shocks alongside sector-specific productivity shocks can improve the performance of the model only under specific parameter and monetary policy settings. Chapter 2 extends this analysis to study the implications of international trade in equities, portfolio transaction costs and recursive utility. Chapter 3 studies the interaction between monetary policy and foreign currency positions in more detail. Different monetary policy regimes can lead to different foreign currency positions by changing the cyclical properties of the nominal ex- change rate. These external positions, in turn, affect the cross-border transmission of monetary policy shocks via a valuation channel. The way export prices are set has important implications for optimal foreign currency positions and the valuation channel when prices are sticky and financial markets are incomplete. Chapter 4 compares the international transmission of uncertainty shocks under alternative asset markets with an emphasis on the behaviour of net foreign assets, exchange rate and currency risk premium and shows that a model with restricted asset trade performs better than a model with complete financial integration in matching certain aspects of the data regarding the dynamics of these variables in response to increased macroeconomic uncertainty.
Author : Georges Dionne
Publisher : Springer Science & Business Media
ISBN 13 : 0792392043
Total Pages : 748 pages
Book Rating : 4.7/5 (923 download)
Download or read book Foundations of Insurance Economics written by Georges Dionne and published by Springer Science & Business Media. This book was released on 1992 with total page 748 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic and financial research on insurance markets has undergone dramatic growth since its infancy in the early 1960s. Our main objective in compiling this volume was to achieve a wider dissemination of key papers in this literature. Their significance is highlighted in the introduction, which surveys major areas in insurance economics. While it was not possible to provide comprehensive coverage of insurance economics in this book, these readings provide an essential foundation to those who desire to conduct research and teach in the field. In particular, we hope that this compilation and our introduction will be useful to graduate students and to researchers in economics, finance, and insurance. Our criteria for selecting articles included significance, representativeness, pedagogical value, and our desire to include theoretical and empirical work. While the focus of the applied papers is on property-liability insurance, they illustrate issues, concepts, and methods that are applicable in many areas of insurance. The S. S. Huebner Foundation for Insurance Education at the University of Pennsylvania's Wharton School made this book possible by financing publication costs. We are grateful for this assistance and to J. David Cummins, Executive Director of the Foundation, for his efforts and helpful advice on the contents. We also wish to thank all of the authors and editors who provided permission to reprint articles and our respective institutions for technical and financial support.
Author : Jinill Kim
Publisher :
ISBN 13 :
Total Pages : 40 pages
Book Rating : 4.:/5 (318 download)
Download or read book Patience, Persistence and Welfare Costs of Incomplete Markets in Open Economies written by Jinill Kim and published by . This book was released on 2001 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we investigate the welfare implications of alternative financial market structures in a two-country endowment economy model. In particular, we obtain an analytic expression for the expected lifetime utility of the representative household when sovereign bonds are the only internationally traded asset, and we compare this welfare level with that obtained under complete asset markets. The welfare cost of incomplete markets is negligible if agents are very patient and shocks are not very persistent, but this cost is dramatically larger if agents are relatively impatient and shocks are highly persistent. For realistic cases in which agents are very patient and shocks are highly persistent (that is, the discount factor and the first-order autocorrelation are both near unity), the welfare cost of incomplete markets is highly sensitive to the specific values of these parameters. Finally, using a non-linear solution algorithm, we confirm that a two-country production economy with endogenous labor supply has qualitatively similar welfare properties.
