Globalization and Risk Sharing / Jaume Ventura, Fernando A. Broner.

Format:

Book

Author/Creator:

Ventura, Jaume.

Contributor:

National Bureau of Economic Research.

Broner, Fernando A.

Series:

Working Paper Series (National Bureau of Economic Research) no. w12482.

NBER working paper series no. w12482

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

This paper presents a theoretical study of the e¤ects of globalization on risk sharing and welfare. We model globalization as a gradual and exogenous increase in the fraction of goods that are tradable. In the absence of frictions, globalization opens new goods markets and raises welfare. We assume, however, that countries cannot commit to pay their debts. Unlike the previous literature, and motivated by changes in the institutional setup of emerging-market borrowing, we also assume that countries cannot discriminate between domestic and foreign creditors when paying their debts. Although globalization still opens new goods markets, we find that it can also open or close some asset markets. The net e¤ect on risk sharing and welfare of this process of creation and destruction of markets might be either positive or negative depending on a variety of factors that the theory highlights.

Notes:

Print version record

August 2006.