Trade Costs, Asset Market Frictions and Risk Sharing
نویسنده
چکیده
I use bilateral import data to test for the role of trade costs and asset market frictions in impeding international consumption risk sharing. Trade costs play a significant role. I do not reject the null of optimal risk sharing within OECD countries, though I do reject for the world as a whole. I calculate the impact on ex-post welfare of moving from historical asset market frictions to optimal consumption risk sharing, holding trade costs fixed. The gains to OECD countries are small while the gains to non-OECD countries are larger. These gains are dwarfed by those from eliminating trade costs. JEL Classification: F41
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