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International Risk Sharing [electronic resource] : Through Equity Diversification or Exchange Rate Hedging? Matsumoto, Akito.

Author/Creator:
Matsumoto, Akito.
Publication:
Washington, D.C. : International Monetary Fund, 2009.
Series:
IMF eLibrary
IMF Working Papers; Working Paper No. 09/138.
IMF Working Papers; Working Paper No. 09/138
Format/Description:
Government document
Book
1 online resource (46 p.)
Local subjects:
Asset markets.
Bond.
Bond portfolio.
Bond portfolios.
Bonds.
Consumer goods.
Domestic investment.
Economic models.
Effect of exchange rate changes.
Equity shares.
Exchange rate.
Exchange rate changes.
Exchange rate fluctuations.
Exchange rate movements.
Exchange rate risk.
Exchange rate shocks.
Exchange rates.
Exchange risk.
Financial assets.
Financial globalization.
Financial instruments.
Financial markets.
Financial risk.
Fluctuation of exchange rates.
Foreign equity.
Foreign exchange.
Foreign exchange hedges.
Foreign exchange rate.
Foreign exchange risk.
Forward contract.
Forward market.
Hedge.
Hedge funds.
Hedges.
Hedging.
Home currency.
International capital.
International currency.
Nominal bonds.
Nominal exchange rate.
Portfolio of bonds.
Present value.
Price elasticity.
Prices.
Private investment.
Real exchange rate.
Real exchange rate fluctuations.
Stochastic discount.
Stochastic discount factor.
Stock prices.
Summary:
Well-known empirical puzzles in international macroeconomics concern the large divergence of equilibrium outcomes for consumption across countries from the predictions of models with full risk sharing. It is commonly believed that these risk-sharing puzzles are related to another empirical puzzle-the home-bias in equity puzzle. However, we show in a series of dynamic models that the full risk sharing equilibrium may not require much diversification of equity portfolios when there is price stickiness of the degree typically calibrated in macroeconomic models. This conclusion holds under a range of assumptions about home bias in preferences, price setting as PCP or LCP, and with or without nominal wage stickiness as long as there is some price rigidity.
Notes:
Description based on print version record.
Contributor:
Engel, Charles.
Matsumoto, Akito.
Other format:
Print Version:
ISBN:
1451872852:
9781451872859
ISSN:
1018-5941
Publisher Number:
10.5089/9781451872859.001
Access Restriction:
Restricted for use by site license.
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