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Title: Interregional and International Risk Sharing and Lessons for EMU

Author(s): Jacques Melitz and Frédéric Zumer

Publication Date: May 1999

Keyword(s): EMU, Fiscal Federalism, Insurance and Credit and Risk Sharing

Programme Area(s): International Macroeconomics

Abstract: How much risk sharing takes place between regions within countries, between countries internationally, and what are the lessons for EMU? We study these questions based on regional data from the US, Canada, the UK and Italy, and national data from an international sample of 23 OECD countries, including all 15 EU members, and do so with the aid of a modified version of a model by Asdrubali, Sørensen and Yosha. In conclusion, we find that even though the surrender of monetary policy will reduce the capacity of the members of EMU to smooth shocks via macroeconomic policy, the regime will promote smoothing of shocks via market channels.

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Bibliographic Reference

Melitz, J and Zumer, F. 1999. 'Interregional and International Risk Sharing and Lessons for EMU'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2154