Commodity Trade and International Risk Sharing: How Much Do Financial Markets Matter? / Harold L. Cole, Maurice Obstfeld.

Format:

Book

Author/Creator:

Cole, Harold L.

Contributor:

National Bureau of Economic Research.

Obstfeld, Maurice.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3027.

NBER working paper series no. w3027

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Commodity Trade and International Risk Sharing

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1989.

Summary:

This paper evaluates the gains from international risk sharing in some simple general-equilibrium models with output uncertainty. Under empirically plausible calibration, the Incremental loss from a ban on international portfolio diversification is estimated to be quite small--0.15 percent of output per year is a representative figure. Even the theoretical gains from asset trade may disappear under alternative sets of assumptions on preferences and technology. The paper argues that the small magnitude of potential trade gains, when coupled with small costs of cross-border financial transactions, may explain the apparently inconsistent findings of empirical studies on the degree of international capital mobility.

Notes:

Print version record

July 1989.