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Macroeconomic volatility after trade and capital account liberalization / Pancaro, Cosimo
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Pancaro, Cosimo
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Advanced economies.
- Bond.
- Capital account.
- Capital flows.
- Collateral.
- Debt Markets.
- Developing countries.
- Economic development.
- Economic Theory & Research.
- Emerging Markets.
- Emerging markets.
- Finance and Financial Sector Development.
- Financial flows.
- Financial integration.
- Financial markets.
- Free Trade.
- Globalization.
- International business.
- International Economics and Trade.
- International trade.
- Liberalization.
- Macroeconomics and Economic Growth.
- Output.
- Private Sector Development.
- Real estate.
- Risk sharing.
- Trade Policy.
- Volatility.
- World economy.
- Local Subjects:
- Advanced economies.
- Bond.
- Capital account.
- Capital flows.
- Collateral.
- Debt Markets.
- Developing countries.
- Economic development.
- Economic Theory & Research.
- Emerging Markets.
- Emerging markets.
- Finance and Financial Sector Development.
- Financial flows.
- Financial integration.
- Financial markets.
- Free Trade.
- Globalization.
- International business.
- International Economics and Trade.
- International trade.
- Liberalization.
- Macroeconomics and Economic Growth.
- Output.
- Private Sector Development.
- Real estate.
- Risk sharing.
- Trade Policy.
- Volatility.
- World economy.
- Physical Description:
- 1 online resource (32 pages)
- Place of Publication:
- Washington, D.C., The World Bank, 2010
- System Details:
- data file
- Summary:
- What are the equilibrium effects of trade and capital liberalization on consumption smoothing? This question is addressed by studying the response to productivity shocks in a baseline two country, two goods, incomplete market model, where foreign borrowing is secured by collateral. The paper shows that international financial integration, modeled by relaxing a borrowing constraint a la Kiyotaki in the domestic country, worsens consumption smoothing; international trade integration, modeled by a reduction of non linear iceberg transportation costs, improves it. As a measure of consumption smoothing, the analysis uses the ratio between the simulated standard deviation of consumption growth and the simulated standard deviation of output growth. These results are qualitatively consistent with the empirical evidence provided by Kose, Prasad and Terrones (2003).
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