Asset price data imply a large degree of international risk sharing, while aggregate consumption data do not. We …. Active households pay a fixed cost to transfer income into or out of assets. These households share risk within and across … countries, and their marginal utility growth prices assets, so asset prices imply high international risk sharing. Inactive …

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 …, financial contracts are incomplete and enforceability of debt repayment is limited. Default risk of debt contracts constrains …