2005, English, Article edition: International risk-sharing and the transmission of productivity shocks [electronic resource] / Giancarlo Corsetti, Luca Dedola, Sylvain Leduc. Corsetti, Giancarlo.

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Bookmark: http://trove.nla.gov.au/version/36707392
Published
  • Washington, D.C. : Federal Reserve Board, [2005]
Language
  • English

Edition details

Title
  • International risk-sharing and the transmission of productivity shocks /​ Giancarlo Corsetti, Luca Dedola, Sylvain Leduc.
Author
  • Corsetti, Giancarlo.
Other Authors
  • Dedola, Luca, 1967-
  • Leduc, Sylvain, 1969-
Published
  • Washington, D.C. : Federal Reserve Board, [2005]
Medium
  • [electronic resource]
Series
Subjects
Summary
  • "A central puzzle in international finance is that real exchange rates are volatile and, in stark contradiction to efficient risk-sharing, negatively correlated with cross-country consumption ratios. This paper shows that a standard international business cycle model with incomplete asset markets augmented with distribution services can account quantitatively for these properties of real exchange rates. Distribution services, intensive in local inputs, drive a wedge between producer and consumer prices, thus lowering the impact of terms-of-trade changes on optimal agents' decisions. This reduces the price elasticity of tradables separately from assumptions on preferences. Two very different patterns of the international transmission of positive technology shocks generate the observed degree of risk-sharing: one associated with improving, the other with deteriorating terms of trade and real exchange rate. In both cases, large equilibrium swings in international relative prices magnify consumption risk due to country-specific shocks, running counter to risk sharing. Suggestive evidence on the effect of productivity changes in U.S. manufacturing is found in support of the first transmission pattern, questioning the presumption that terms-of-trade movements in response to supply shocks invariably foster international risk-pooling"--Federal Reserve Board web site.
Notes
  • Title from PDF file as viewed on 3/​24/​2005.
  • Includes bibliographical references.
  • Also available in print.
Technical Details
  • System requirements: Adobe Acrobat Reader
  • Mode of access: World Wide Web
Language
  • English
Libraries Australia ID
Contributed by
Libraries Australia

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