DP9541 Debt Crises and Risk Sharing: The Role of Markets versus Sovereigns
|Author(s):||Sebnem Kalemli-Ozcan, Emiliano Luttini, Bent E Sørensen|
|Publication Date:||July 2013|
|Keyword(s):||Capital Markets, Income Insurance, International Financial Integration|
|JEL(s):||E2, E6, F15, G15|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=9541|
Using a variance decomposition of shocks to GDP, we quantify the role of international factor income, international transfers, and saving in achieving risk sharing during the recent European crisis. We focus on the sub-periods 1990--2007, 2008--2009, and 2010 and consider separately the European countries hit by the sovereign debt crisis in 2010. We decompose risk sharing from saving into contributions from government and private saving and show that fiscal austerity programs played an important role in hindering risk sharing during the sovereign debt crisis.