I study the constrained efficient allocations of a simple model of risk sharing and capital flows across countries … assuming that each country cannot commit to fully repay its contract obligations. In the model, the degree of risk sharing and …

default risk, interest rate spreads, current account and inflation tax rates as well as and higher volatility in consumption … fiscal policy and endogenous default risk and country interest rate spreads that rationalizes these empirical findings. In a …

improvement in the degree of international risk sharing. To account for this puzzle, we construct a general equilibrium model that … and sovereign default increases substantially, but the degree of risk sharing as measured by cross section and panel … regressions increases hardly at all. The explanation, we propose, is that international risk sharing is not sensitive to the …

We examine international risk-sharing in economies with non-additive preferences. Examples based on the Epstein …-Zin class with Chew-Dekel risk preferences in some cases exhibit quantitatively different behavior from expected utility. We … explore the implications for international risk sharing and real exchange rate fluctuations. …