In this paper we examine the formal implications of international risk sharing among a set of countries in the presence of market frictions and forward-looking behaviour. We show that if frictions prevent consumption to adjust instantaneously to its optimal long run level, consumption streams in...

In this paper we examine the implications of international risk sharing among a set of countries in the presence of market frictions which complicate the instantaneous adjustment to the first-order conditions. We suggest approximating the consumption streams of countries belonging to the risk...

We investigate the extent of risk sharing among the Italian regions with respect to both longrun and short-run income fluctuations. We use Vector Equilibrium Correction Models (VEqCMs) with the aim of testing all implications of the theory without preliminar data filtering, and without imposing...