تحرک سرمایه و به اشتراک گذاری بین المللی از خطر دوره ای
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|27814||2013||21 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Monetary Economics, Volume 60, Issue 1, January 2013, Pages 42–62
This paper investigates whether the international globalization of financial markets allows for significant cross-country risk-sharing at the business cycle frequency. We find that cross-country risk-sharing is still limited and this is unlikely to be the result of financial frictions that limit state-contingent contracts. Part of the limited international risk sharing could be the consequence of frictions that de-facto reduce the short-term mobility of financial capital. But even with these frictions we find significant divergence between model predictions and the data.
The globalization of capital markets that started in the 1980s created a regime of high international capital mobility across industrialized countries and several emerging economies. Indicators of international capital mobility, both de-jure and de-facto, show that capital mobility increased significantly since the early 1980s. 1 For example, in the United States – the largest industrialized country – the stocks of gross foreign assets and liabilities have more than tripled during the last 30 years. Because income fluctuations remain unsynchronized across countries – with the exception, perhaps, of the most recent crisis – a natural question to ask is whether the global integration of financial markets has facilitated international risk-sharing, particularly by reducing the impact of country-specific income fluctuations on the consumption of tradable goods. The fact that the cross-country ownership of foreign assets has increased dramatically does not necessarily imply that countries are capable of better smoothing their consumption of tradable goods relatively to their idiosyncratic income over the business cycle. Even if countries experience large international capital flows at low frequencies, which in turn lead to large stocks of foreign assets, the cyclical dynamics of these flows may not generate greater consumption smoothing at the business cycle frequency. Thus, the first goal of this paper is to document whether the canonical model of optimal consumption and savings with complete markets and full capital mobility is consistent with the high frequency dynamics of consumption observed in a set of industrialized and emerging economies. The canonical model includes two countries, each one endowed with stochastic income processes for tradable and nontradable goods. In the empirical application of this model, the first country is the “focus” country (for example the U.S.) while the second represents the rest-of-the-world (the aggregation of all remaining countries). We put together a sample of 21 countries including 15 developed economies and six large emerging economies. The model is then solved for each of these countries, treating each one as the focus country and pairing it with its corresponding rest-of-the-world aggregate. In line with the structure of the model, the observed income of each country is broken down into tradable and nontradable components. We then estimate joint stochastic processes for the various components of income in the focus country and its corresponding rest-of-the-world aggregate, and use them to calibrate the model. Finally, the model's numerical simulations are used to produce time series for consumption, which are then compared with their empirical counterparts. Since the analysis focuses on the business cycle frequency, it abstracts from forces that drive international capital flows and consumption smoothing at longer horizons, such as cross-country differences in medium- and long-term growth. In this respect, this study differs in a complementary way from Gourinchas and Jeanne (2011), who focus on growth differences across countries. Despite the different focus, we reach a similar conclusion: the canonical model with complete markets and perfect capital mobility displays dynamics very different from the data. The assumption of complete markets made in the canonical model is obviously very stylized and, at least in principle, raises the possibility that incomplete markets may bring the model closer to the data. In line with this argument, recent studies have emphasized the possible links between incomplete markets, frictions in financial markets and global imbalances (see Angeletos and Panousi, 2011, Caballero et al., 2008, Fogli and Perri, 2006 and Mendoza et al., 2009). Since these studies focus mostly on low-frequency movements in foreign asset holdings, it is natural to ask whether similar frictions can also be important for explaining the high-frequency comovement of tradable consumption and income within each country. To address this question, we extend the model by introducing incomplete markets. In this alternative environment, labeled the Bond economy, countries can trade only non-state-contingent assets, subject to a lower bound (or borrowing limit). The results show that the dynamics of consumption in this economy are very similar to the dynamics predicted by the model with complete markets. This implies that, given the observed characteristics of income fluctuations, countries should achieve a high degree of risk sharing even if non-contingent bonds are the only assets traded in world asset markets. This result is reminiscent of results obtained in previous studies showing that non-contingent bonds already provide significant consumption insurance (see Baxter and Crucini, 1995 and Heathcote and Perri, 2002). 2 This result also implies, unfortunately, that the high-frequency dynamics of consumption predicted by the Bond economy are quite different from the dynamics observed in the data because, as observed above, the latter differ sharply from the dynamics predicted by the complete markets model. The Bond economy model shares some of the features of the model proposed by Bai and Zhang (2012) to study the effect of financial integration on international risk sharing. They consider a global economy with a continuum of heterogeneous small open economies trading non-state-contingent bonds exposed to default risk, and with country income fluctuations purely idiosyncratic. The Bond economy can be thought of as a two-agent variant of their model without default but enriched to include uninsurable risk in the form of nontradable goods and aggregate (global) shocks.3 Moreover, our work also differs in that we focus on the time-series behavior of consumption, instead of the cross-country panel elasticity of consumption with respect to income in a stochastic stationary equilibrium. Since the Bond economy with borrowing limit can be considered one of the most restrictive forms of financial structure, these results cast doubt on the hypothesis that financial market frictions limiting state-contingent contracts can explain the low degree of international risk sharing at the business cycle horizon.4 Notice that this does not imply that market incompleteness cannot explain low-frequency movements in foreign assets and international portfolio composition, or that financial frictions are not relevant for the transmission mechanism at work during global financial crises.5 The second type of frictions proposed in this paper as a potential mechanism to reconcile the empirical dynamics of consumption with the theory are international portfolio rigidities. Starting from the Bond economy as described above, we add a convex cost of changing the stock of foreign assets. This cost can be interpreted as capturing actual portfolio adjustment costs at the individual level and/or rigidities that limit the international mobility of financial investments.6 With this friction, the ability of the model to replicate the empirical dynamics of consumption improves significantly, although there is still a sizable divergence between the predictions of the model and the data. Effectively, portfolio adjustment costs bring the economy closer to financial autarky. Thus, an interpretation of this result is that, although formal barriers to the mobility of capital have been lifted in most countries, international financial markets remain intrinsically segmented in the short term. This paper is related to the large literature on international risk sharing and international real business cycles (IRBC). In particular, our findings are in line with the empirical work by Lewis (1996). She concluded that neither non-separability in tradable and nontradable consumption nor capital market restrictions could explain, separately, the observed cross-country consumption co-movements. When considered together, however, the risk sharing predictions of a model with consumption non-separability and capital markets restrictions cannot be rejected by the data. More recently, Kose et al. (2009) provide further empirical evidence of a limited degree of international risk-sharing in a large dataset of industrialized and developing countries, and find little impact coming from financial globalization. In the IRBC literature, this paper is closely related to the studies by Stockman and Tesar (1995) and Benigno and Thoenissen (2008). Stockman and Tesar showed that non-tradability of goods does not improve the ability of the IRBC model with complete markets driven by technology shocks alone to match the observed higher cross-country correlations of output relative to consumption. Benigno and Thoenissen showed that this remains the case even if complete markets are replaced with a riskless bond, although with this modification the model can explain the low correlation between the real exchange rate and relative consumption. The work of Aguiar and Gopinath (2007) is also relevant, because they show that a business cycle model of a small open economy can produce consumption volatility in excess of income volatility as the result of shocks to growth rates or trends of income processes. Thus, a complementary explanation for the apparent lack of international risk sharing may derive from cross-country differences in trend and stationary components of income fluctuations. Section 6 of the paper shows, however, that our main findings are robust to the introduction of growth shocks calibrated to the data. The results of our analysis are also related to recent findings obtained by Corsetti et al. (2011) and Fitzgerald (forthcoming). The findings of these two studies suggest that an alternative force driving the lack of risk sharing in the data may be fluctuations in real costs of trading goods. Fitzgerald examined the extent to which cross-country variations in ratios of marginal utilities can be accounted for by variations in relative wealth (i.e. deviations from complete markets) versus other mechanisms that operate through relative goods prices, and found that the former alone cannot account for observed fluctuations in marginal utility ratios. Corsetti et al. showed that the observed low correlation between relative consumption and real depreciation, which IRBC models with complete markets cannot explain, tends to be particularly low at cyclical frequencies. This is similar to our finding that the complete markets model does a poor job at matching cyclical consumption risk sharing. They also showed that an incomplete markets model with nontradable goods can do better at accounting for this feature of the data if it incorporates income effects from output shocks to both tradables and nontradables, which can cause the international relative prices of a country to strengthen, together with a rise in relative consumption. The rest of the paper is organized as follows. Section 2 illustrates some empirical regularities that are set as targets for the quantitative application of the model. Section 3 describes the theoretical model and Section 4 conducts the quantitative analysis. 5 and 6 conduct some robustness checks and the final Section 7 presents concluding remarks.
نتیجه گیری انگلیسی
This paper investigates the extent to which international globalization of financial markets allows for cross-country risk-sharing at the business cycle frequency. The findings suggest that cross-country cyclical risk sharing is still limited and that this is unlikely to be the result of financial market frictions that limit the availability of state-contingent trades (insurance) and/or to sizable nontradable income fluctuations. Frictions that de-facto reduce the short-term mobility of financial capital or international portfolio adjustment costs play an important role but do not completely eliminate the gap between the predictions of the model and the data. We leave for future research the investigation of additional factors that could explain the still limited degree of international risk sharing.