volatility of consumption growth relative to that of income growth has increased for more financially integrated developing … economies in the 1990s. Second, increasing financial openness is associated with rising relative volatility of consumption, but … only up to a certain threshold. The benefits of financial integration in terms of improved risk-sharing and consumption …

Economic theory predicts that consumption growth rates should be highly correlated across countries. Empirical evidence … integration has a limited impact upon cross-country consumption correlations, labour market rigidities significantly increase … consumption correlations. The results suggest that labour market rigidities improve the allocation of consumption risks either by …