Conventional wisdom suggests that financial liberalization can help countries insure against idiosyncratic risk. There is little evidence, however, that countries have increased risk sharing despite recent widespread financial liberalization. This work shows that the key to understanding this...

Improved consumption risk sharing is one of the fundamental predicted benefits of increased financial integration, yet the empirical evidence concerning this proposition is mixed. Using the novel empirical technique of wavelet analysis, this paper for the first time in the literature uncovers...

While paying careful attention to the stochastic properties of income process, this paper tests the joint rational expectation and permanent income hypothesis (RE/PIH) to clarify how and to what degree financial integration delinks national income and consumption. It is shown that both the OECD...

We empirically investigate time variation in capital market integration and consumption risk sharing using data for 16 countries from 1875 to 2012. We show that there has been considerable variation over time in the degrees of capital market integration and consumption risk sharing and that...

The dramatic impact of the current crisis on performance of businesses across sectors and economies have been headlining the business press for the past many months. Interestingly, the impact of the crisis across categories of goods/services and across economies reveals several interesting...

This paper addresses the consumption-real exchange rate anomaly. International real business cycle models based on complete financial markets predict a unitary correlation between the real exchange rate and the ratio of home to foreign consumption when subjected to supply side shocks. In the...

We study the differential impact of large exchange rate devaluations on the cost of living at different points on the income distribution. Across product categories, the poor have relatively high expenditure shares in tradeable products. Within tradeable product categories, the poor consume...