Financial integration and international risk sharing

详细信息    查看全文

• 作者：Yan Bai^a ; ^{yan.bai@asu.edu} ; Jing Zhang^b ; ^{jzhang@umich.edu}
• 关键词：F02 ; F34 ; F36 ; F41
• 刊名：Journal of International Economics
• 出版年：2012
• 出版时间：January 2012
• 年：2012
• 卷：86
• 期：1
• 页码：17-32
• 全文大小：1085 K

文摘

Conventional wisdom suggests that financial liberalization can help countries insure against idiosyncratic risk. There is little evidence, however, that countries have increased risk sharing despite widespread financial liberalization. We show that the key to understanding this puzzling observation is that conventional wisdom assumes frictionless international financial markets, while actual markets are far from frictionless: financial contracts are incomplete and contract enforceability is limited. When countries remove official capital controls, default risk is still present as an implicit barrier to capital flows. If default risk were eliminated, capital flows would be six times greater, and international risk sharing would increase substantially.